Saudi Arabia sees higher oil revenue as OPEC cuts boost prices

By Nayla Razzouk and Claudia Carpenter on 12/19/2017

DUBAI (Bloomberg) -- Saudi Arabia expects oil revenue to jump 12% next year in a sign the world’s biggest crude exporter expects prices to keep rising in 2018.

The top OPEC producer expects to collect 492 billion riyals ($131 billion) from oil sales in 2018, compared with 440 billion riyals this year, the Finance Ministry said on Tuesday in a budget statement. Non-oil revenue will climb to 291 billion riyals from 256 billion riyals in 2017.

Oil is on course for a second annual gain after the Organization of Petroleum Exporting Countries and its allies agreed to extend production curbs through the end of 2018. In a sign domestic prices are heading higher, Saudi Arabia plans to raise domestic gasoline prices by about 80% in January, according to a person with knowledge of the matter.

“Assuming Saudi Arabia will continue to comply with the OPEC production cuts throughout 2018, the budgeted increase in oil revenue reflects an expectation of higher export prices,” said Ziad Daoud, chief Middle East economist for Bloomberg Economics. Higher exports or an increase in oil prices can help to balance the budget, he said.

Saudi Arabia wouldn’t be the only OPEC nation looking for higher oil prices next year. Iraq, OPEC’s second-biggest producer, is assuming $46/bbl for its 2018 budget, pending parliament approval, up from $42/bbl for this year. Qatar’s 2018 budget assumes $45/bbl,l while Iran expects to earn $33 billion from oil sales at $50/bbl.

The Saudi government relies heavily on oil sales for revenue, and its finances have taken a blow since prices started tumbling in 2014. Total projected revenue next year is at 783 billion riyals, up from 696 billion riyals in 2017. The government intends to spend 978 billion riyals in 2018 compared with 926 billion this year, the Finance Ministry said.

The kingdom implemented austerity measures in 2016 to weather the downturn. In April, Crown Prince Mohammed bin Salman rolled out the Saudi Vision 2030, an economic plan to end the country’s “addiction” to oil. The country intends to sell a stake of about five percent in state energy producer Saudi Arabian Oil Co. , the world’s biggest oil exporter.

Related News ///


Comments ///

comments powered by Disqus