2022 was undoubtedly a year of slumps in stock markets, and projections for 2023 remain cautious as inflation and geopolitical tension continue to affect global economy. One market, however, seems to be benefiting from the turmoil, defying the general downward trend with steady price hikes: the oil and gas market.
For oil-producing countries in the Middle East and North Africa, the rise in oil and gas prices is helping fuel economic growth. Although oil revenues have shaped these countries’ economies for the past seventy years, financial markets’ experts and analysts agree that, this time, the recent rise in oil prices will impact local economies in a more sustainable way, as GCC countries will be using their revenues in financing their economic diversification efforts, leading to more self-sufficient nations.
“Middle East producers, and specifically those in the Gulf region, have embarked on ambitious plans to diversify their economies away from oil” says Ritu Singh, Regional Director of Stone X Group Inc. She adds: “These countries are using the windfalls of the currently high oil prices to reshape their economies, and with it, the region.”
According to a recent report by the International Monetary Fund (IMF), Gulf economies will receive up to $1.4 trillion in additional revenues in the next four to five years, as oil prices remain high.
Singh comments: “Increased demand and persisting geopolitical tensions are changing the landscape of the energy supply chain. Oil and gas prices are likely to remain high, and oil and natural gas producers and exporters in the MENA region stand to be the biggest winners.”
In addition to economic diversification,oil-rich MENA countries are raising the profile of their financial markets by launching more regional crude oil benchmarks, such as the Abu Dhabi Murban Crude contract. They’re also taking many of the state-owned companies public in their own stock markets, leading to deeper liquidity and higher appeal for foreign investors.
Moreover, oil-producing countries have started to develop mega projects, including NEOM in Saudi Arabia, while seeking to gain more global weight through international investments such as Qatar Investment Authority’s €2.4bn investment in German power company RWE and $1.5bn investment in Bodhi, James Murdoch’s media venture in India, or Emirati Mubadala’s investment in US Dental Care Alliance which aims at exploring clean fuel projects in Pakistan.