Qatar's budget will be drawn up on the assumption of an oil price of $40 a barrel to shield the gas-rich Gulf country from oil prices volatility, Qatar's Emir said on Tuesday.

Oil prices have recovered only slightly since tumbling to their lowest in almost two decades in March as the COVID-19 pandemic hit demand. Brent crude futures were trading at $39.67 a barrel at 0845 GMT on Tuesday.

Crude oil prices provide a benchmark for gas prices, impacting Qatar, which is one of the world's biggest liquefied natural gas exporters.

"As we are keen to bypass the negative economic consequences resulting from the volatility of oil prices we have instructed that the state budget be based on the price of oil at $40 per barrel, which is lower than the expected price," Sheikh Tamim bin Hamad Al-Thani said in a speech to the country's Shura council.

Early indications for Qatar's first half deficit put the figure at 1.5 billion riyals ($412 million), much better than expectations, he said.

The tiny but rich Gulf state is expected to see its economy shrink by 4.5% this year, the International Monetary Fund has predicted, amid lower energy prices and the coronavirus crisis.

That would be the smallest contraction among countries in the oil-producing Gulf, according to the Fund.

Qatar said in December last year it expected to achieve a surplus of 500 million riyals this year, but that was before the pandemic and the ensuing oil price shock. It had based the 2020 budget on an oil price assumption of $55 per barrel.

According to the IMF, Qatar will be the only country in the Gulf to post a budget surplus this year, estimated at 3% of GDP.