Bahrain and Oman are among the most vulnerable oil exporters in the world amid the latest weakness in crude prices, according to a new research note from Bank of America Merrill Lynch.
It said many frontier markets remain highly vulnerable – especially to oil price weakness – as fixed exchange rates and lack of policy capacity delayed the adjustment.
The research note said Bahrain was most vulnerable among the 68 economies the bank covers because it has the largest fiscal deficit, while Oman has one of the widest current account gaps.
It added that Kuwait remains the fundamentally strongest GCC market while Russia is the oil exporter with the best fundamentals globally.
Last month, figures from Bahrain’s central bank showed the country has been unable to stem the decline in its foreign reserves as lower oil prices strain the smallest economy among Gulf nations.
Net foreign assets dropped 11 percent to BD645.2 million ($1.7 billion) in February.
Overall, they’re down 71 percent from a peak of BD2.24 billion in November 2014, according to data compiled by Bloomberg.
Bahrain, which pegs the dinar to the dollar, has been more vulnerable to slumping oil prices and regional political instability than richer Gulf Cooperation Council states.
The further drop in foreign reserves comes nearly a month after the International Monetary Fund warned that Bahrain, a close Saudi ally and the home of the US Navy Fifth Fleet, needs to make significant spending cuts to restore stability to its budget and improve investor confidence.
Crude oil futures rose for a fourth consecutive session on Tuesday as investors covered short positions, though worries over a festering supply glut kept a lid on prices.
Brent crude oil, the international benchmark, was up 0.3 percent at $45.97. The market is up slightly so far this week after dropping for the past five weeks.
The Organisation of the Petroleum Exporting Countries (OPEC) has been trying to reduce a global crude glut with production cuts. OPEC states and 11 other exporters agreed in May to extend cuts of 1.8 million barrels per day (bpd) until March 2018.
Full article: Bahrain, Oman ‘most vulnerable’ in new era of low oil prices