The upward trend in oil prices that we witnessed in the Q2 has continued in Q3. The average price of Brent crude oil was $73.6 in Q3 vs. $68.8 in Q2. That strength has persisted in early October with the oil price well above $80/bbl. This of course bodes well for the GCC economies going forward. Encouragingly, unlike previous periods of higher oil prices, GCC governments are actually accelerating their pace of economic reforms. They are using the extra funds to invest in projects and programs to diversify away from oil. A wise move and one which we think will pay dividends in the coming years.
Higher oil prices are of course not good news for the MENA countries that import most of their energy needs such as Morocco and Tunisia. In Morocco’s case, after decades of importing 90% of its energy needs, Morocco now generates 44% of its energy through renewable domestic sources such as hydro, solar, and wind. So, the hit is cushioned now and becoming more so as time progresses. Morocco and Tunisia are also heavily dependent on tourism. On this front, prospects are improving as travel restrictions slowly fade, and vaccination programs gather steam. So even in these countries, there is reason for optimism.
Sources: Bloomberg LP, MENA Capital