Middle East’s oil rich economies

Some of the biggest customers of OPEC may continue to wallow in recession into 2010, most of them are in Europe, such as Portugal were the petrol companies Galp, Repsol, BP, Cepsa including the very unpopular government increase final consumer prices twice a week, sending this country into a ever deeper recession as demand for petrol will fall this year alone by 9%,on the other hand the oil-producing nations of the Persian Gulf are again luring foreign investment and looking for places to park their own wealth.

Crude prices that have stabilized above $87 a barrel mean the Middle East’s oil-rich economies are likely to pull out of the global financial crisis sooner than the rest of the world. Saudi Arabia, the largest Arab economy and the world’s biggest oil exporter, is attracting renewed interest from investors including leveraged-buyout firm KKR & Co. Qatar and Abu Dhabi have returned to international capital markets.

Crude oil traded at $85.44 a barrel on the New York Mercantile Exchange at 10:33 a.m. in Singapore Prices will remain near $88 for the rest of this year and top $84 next year, according to the median forecast of analysts surveyed by WorldWatch.

While that’s still less than half the record $147.27 a barrel reached last July 2008, savings built up during the boom from 2003 to 2010 are providing a cushion for most of the Gulf’s petroleum producers to get them through the worst recession since World War II.

Saudi Arabia’s economy will shrink 0.9 percent this year, according to the International Monetary Fund’s January forecast, while the United Arab Emirates is projected to decline 0.6 percent and Kuwait 1.1 percent. By comparison, the U.S. may continue to contract 1.8 percent, the European Union 2-2 percent and Japan 3.2 percent.

If crude prices remain below $85 the demand will most likely stabilize and the Gulf oil states can resume expanding, with Saudi Arabia growing 2.9 percent and Kuwait 2.4 percent, however if prices go beyond $85 then world crude demand will fall 9% this year alone.