Kuwait is expected to post a record budget surplus of up to 5.29 billion dinars ($18 billion) in the fiscal year which ends March 2006 thanks to high oil prices, the country's leading bank said in a report. If that higher forecast pans out, that would give the tiny Gulf Arab state a surplus almost double the one believed to have been logged in the previous fiscal year 2004-05.
National Bank of Kuwait said in a report by chief economist Randa Azar-Khoury that based on various oil price scenarios it expects Kuwait's Export Crude (KEC) to range from $37.4 to $46.1 a barrel during the current fiscal year.
That means Kuwait's oil revenues would come in between 9.71 billion dinars and 11.89 billion dinars, NBK added.
With actual government expenditures at 5 percent to 8 percent below the projected 6.95 billion dinars according to NBK's estimates, "the country would reap a budget surplus between 3.31 billion dinars and 5.29 billion dinars," NBK added.
"NBK's base-case scenario where KEC averages $42.3 yields a surplus of 4.48 billion dinars ($15.3 billion)," the bank added.
There's still no official estimate for Kuwait's budget surplus for the fiscal year ended in March 2005. But Azar told Reuters that Kuwait is estimated to have posted a surplus in the neighbourhood of 2.8 billion dinars for fiscal 2004-05, based on a Kuwaiti crude price of about $35 a barrel.
Oil sales account for up to 90 percent of state revenues in tiny Kuwait and about half of GDP in the Opec nation which controls just about 10 percent of global petroleum reserves.
Kuwait was estimated to be producing crude at about or close to 2.65 million barrels per day (bpd) in May.
In the report, Azar said Kuwait crude for Asia delivery jumped back by June 6 to its former peak of $48.8 registered two months ago. For May, KEC averaged $44.15, down $1.6 from April.
Spreads between KEC and lighter benchmarks continued to shrink in May, to $4.4 against Brent and $5.6 against West Texas Intermediate, compared with $9 and $10 in March, respectively.
NBK said the Centre for Global Energy Studies (CGES) expects demand growth to remain steady during the rest of the year, encouraging Opec to keep supplies stable at around 30 million bpd. Accordingly, oil prices would remain close to current levels during summer, moderating slightly through winter.
In this scenario, NBK expects KEC to average $42.8 in the second and third quarters, easing toward $41.7 in the fourth.
Should build-up in US crude inventories pressure oil prices down again such that Opec decides to curb overproduction in the second half, CGES estimates a mere 500,000 bpd cut would send Brent above $51 in the third quarter and beyond $55 in winter.
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