Saudi needs oil above $ 49 to avoid deficit; Qatar break-even $ 24: IMF
Gulf Times - 21 September, 2008
www.gulfinthemedia.com:80/index.php?id=430091&news_type=Economy&lang=en

Saudi Arabia, the world's largest oil exporter, will need crude prices to
remain above $ 49 a barrel to avoid a fiscal deficit, a senior International
Monetary Fund official has said.

"If it goes below that level we would start seeing a fiscal account
deficit," Mohsin Khan, director of Middle East and central Asia at the IMF,
told Dow Jones Newswires.

Oil prices have fallen drastically in the past two month, shedding over $ 50
in value since they hit $ 147 a barrel in July, raising concerns over the
continued strength of Persian Gulf Arab economies.

Saudi Arabia, the Middle East largest economy, depends on oil and gas sales
for 90% of its export income.

"Saudi Arabia's break-even price is the highest among the Gulf Co-operation
Council Countries because they are spending on a lot of projects right now,
and oil money is used to fund these projects," he said. Further declines in
oil prices could tip the region's economies over the edge as they continue
to spend heavily on infrastructure projects.

According to Middle East Economic Digest, Gulf states are spending about $
2.3tn on projects.

Other Gulf states with smaller populations and lower government spending
like the UAE are able to run a fiscal surplus as long as oil prices are
above $ 23 a barrel.

"The UAE will have a fiscal balance at an oil price of $ 23, if it goes
below they would run a deficit. For Qatar, the break-even price is $ 24 a
barrel," Khan said. Kuwait's break-even price is $ 33 a barrel, he added.

The figures, to be published in the IMF's next regional outlook for the
Middle East and Central Asia, also show that other countries in the region
are already running a fiscal deficit with current oil price levels.

"Iran's break-even price is $ 90 a barrel, and that is a big issue in Iran
right now," Khan said.

"If prices dip below $ 90 a barrel, and we have seen it touch $ 89 earlier
this week, then they would have to tighten their public expenditure policy,
and probably cut subsidies, which would be an issue for the government
there - the public would not be content," he said.

Iraq has the highest break-even price in the region, according to the IMF
figures. The war-torn country needs prices above $ 110 a barrel to balance
its books.

"They are almost starting from scratch, so it's normal... it won't be normal
if the break-even point is lower because that would mean no work is being
done," he said.

Algeria, whose minister is acting as the president of the Organisation Of
Petroleum Exporting Countries this year, will be able to balance its budget
with oil above $ 56 a barrel, Khan said.