By Vinod Nair — MUSCAT: Dec. 11: Citizens and residents of Oman have welcomed the final agreement between Opec and non-Opec members to cut oil output by nearly 600,000 barrels per day (bpd) from next year. While it is not clear what the short-term impact of this agreement would be, it was still felt an output cut was long overdue, and it would reverse economic downslide to some extent. The Ministry of Oil and Gas on Sunday confirmed that Oman would cut its daily production by 45,000 bpd or 4.5 per cent of the near-current output levels of 1 million bpd.
At the same time, fears have been expressed that increase in crude prices will lead to a rise in fuel prices, which will lead to domestic inflation and higher commodity prices.
“Certainly, it is good news for the economy and for our jobs. At the same time, higher fuel prices will lead to higher transportation costs,” said Khalil al Balushi, an employee in the government sector.
“I just hope the decision-makers have taken an appropriate decision keeping in mind interests of the country and its development goals,” said a citizen.
“Overall, Omani market has been going through uncertainty. Finally, there’s some good news. Just want the spending on projects to pick up; this is really a big relief,” said Ranjit P, a contracting company employee, whose company has been struggling to pay salaries in the last few months.
Speaking to the Observer, experts felt a net benefit accruing to the energy industry as well as the national economy going into 2017 and beyond. With prices projected to rebound progressively to around $60 per barrel in 2017 as a result of this groundbreaking global deal, the outlook for the national economy promises to be better than it has been in the current year.
The resurgence of US shale will undermine the Opec-fuelled price rally, capping oil prices at roughly $50 per barrel through 2017, according to a short-term outlook of EIA.
An Oman-based economic expert sees the crude inventory so far built up to be exhausted over a three-year period.
He wants the recovery process to be slow and erratic.
The long-term equilibrium price for major oil grades should be in the range of $80 to $90.
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