Non-OPEC oil producer Oman has been talking to other countries in the Gulf about potentially receiving financial aid to help its economy and fiscal position which are hit by the low oil prices and the measures to curb the spread of COVID-19, Bloomberg reported on Thursday, quoting officials from the region and a U.S. official with knowledge of the matter.
Oman, the top oil exporter from the Gulf that is not a member of OPEC, had already suffered economically even before the oil price crash in early March. A day before oil collapsed, Moody’s downgraded its rating for Oman due to rising government debt and lower fiscal buffers. The rating agency put the rating under review for downgrade in late March because of Oman’s heightened vulnerability to oil price shocks.
According to Moody’s, the most vulnerable oil producers in terms of credit profiles are led by the Gulf Cooperation Council (GCC) members Oman and Bahrain. Fitch Ratings also placed Oman among the oil producers “where weaker balance sheets and policy buffers will limit governments’ capacity to respond to the oil price slump without putting pressure on their ratings.”
Oman’s break-even price–the oil price required to balance the government budget, all else being equal–is $82 per barrel for Brent Crude, according to Fitch Ratings.
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Fitch also downgraded Oman in March to “reflect the continued erosion of Oman’s fiscal and external balance sheets, which could accelerate in an environment of lower oil prices despite prospects for faster implementation of fiscal consolidation measures.”
According to Bloomberg, it is vital for other Gulf countries to see Oman’s economy and political climate stable because of Oman’s role as a regional mediator between the rival states in the region.
The ongoing OPEC+ cuts, in which Oman participates as part of the non-OPEC group of nations, will deepen the deficits in the GCC and stall growth, Fitch Ratings said last month. Oman’s non-oil sector is set to slip into a recession of 5 percent this year, Fitch said, noting that “In lower-rated Oman and Bahrain, (further) support from the rest of the GCC may be necessary for the sustainability of their currencies and debt levels.”