Oil prices suffered a fresh bout of weakness this month amid growing concerns over rising global coronavirus cases, which reinforces our view that economic recoveries in the Gulf will be slow. At the recent OPEC ministerial meeting, the cartel emphasised that it stands ready to act if the outlook for oil demand continues to worsen, suggesting that it is increasingly worried. Continued low oil prices are unlikely to result in dollar pegs being abandoned, but governments will need to address large budget deficits. While several have turned to dollar bond markets, the big picture is that austerity will remain the order of the day, holding back the rebound in activity.
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