Kuwait's oil output to fall in 2021, breakeven at +$90/b: S&P Global Ratings

Kuwait's oil sector is expected to contract in 2021 due to the ongoing OPEC+ production cut agreements, which will stifle the Gulf state's economic growth, S&P Global Ratings said in a July 16 report.

The ratings agency downgraded Kuwait's sovereign rating to 'A+' from 'AA-', with a negative economic outlook, citing its budget deficit, lack of funding strategy and sluggish oil sector.

"The negative outlook primarily reflects risks over the next 12-24 months relating to the government's ability to overcome the institutional roadblocks preventing it from implementing a financing strategy for future deficits," it said.

Kuwait's economy depends on oil, accounting for 90% of exports and government revenue.

Kuwait produced an average of 2.43 million b/d in 2020 and, S&P Global Ratings forecasts it will decrease to 2.39 million b/d in 2021 before rebounding to 2.78 million b/d in 2022, 3.1 million b/d in 2023 and 3.2 million b/d in 2024, it said.

Kuwait's economy is expected to grow by only 0.5% in real terms in 2021, following an 8.9% contraction last year on oil production cuts and pandemic effects, S&P Global Ratings said.

"A stronger recovery should follow in 2022 and 2023, with GDP growth averaging 7% as OPEC+ cuts end and Kuwait ramps up production," S&P Global Ratings said.

It estimates that Kuwait's fiscal breakeven oil price is "over $90/b," which is substantially above the rating agency's medium term price assumptions of Brent oil averaging $65/b in 2021, $60/bbl in 2022 and $55/bbl in 2023.