According to the Economic Commentary of the Qatar National Bank (14 December 2014), “Qatar’s economy is expected to remain resilient to lower oil prices.
The international oil market has experienced significant adjustment in recent weeks, with the Brent crude oil price falling 43% from USD115/barrel in June to around USD63/b currently. Despite the drop in oil prices, we expect a gradual recovery in prices starting in 2015. This is based on supply side adjustments that are likely to occur at oil fields where the cost of production is highest, namely in the US. Even if oil prices fall further, which is not expected, Qatar has the capacity to fully finance its ambitious investment programme going forward.”
The reason that has driven the drop in oil prices in recent weeks has been an upward shift in expectations for a supply glut in 2015, combined with weaker than expected demand, particularly in China. In July, the IEA estimated that the world oil market would be oversupplied by around 0.1m b/d on average in 2015. However, the IEA’s latest report increased its estimate for this supply glut to 1.6m b/d, driven by both lower expectations for demand and higher expectations for supply.
Going forward, oil prices are expected to recover gradually. This is partly because lower oil prices will stimulate greater demand but also because lower prices will discourage investment in new production. The region most at risk of investment cutbacks is US shale oil, where production is more costly than for conventional fields.