“Using our own estimates for the government revenue breakdown, we calculate that the numbers presented in the budget statement are based on an average oil price of around $ 50 per barrel between 2020 and 2023,” Farouk said. Soussa, London-based analyst at Goldman.
Brent fell 6.3% to $ 39.27 a barrel last week as more countries tightened restrictions to deal with the coronavirus pandemic and US President Donald Trump was infected, pushing traders atworry about the outlook for energy demand.
While $ 50 oil would be a 25% hike from current prices, it would still be well below the pre-pandemic level of around $ 65 and less than what Saudi Arabia needs to balance its budget. .
Goldman’s calculations are roughly in line with those of Cairo-based investment bank EFG Hermes, which said Saudi Arabia was basing next year’s budget on an oil price of $ 50 to $ 55. Goldman himself is more bullish, predicting Brent will climb to $ 65 by the end of 2021.
Saudi officials expect the country’s budget deficit tonarrow to 5.1% of gross domestic product in 2021 from 12% this year as they cut spending, according to last week’s release.
The kingdom tends to take a relatively conservative view of crude prices in budgeting and does not disclose its assumptions, leaving analysts to estimate them from other projections. The finance ministry did not immediately respond to a request for comment on Sunday.
Saudi Arabia would need oil to trade at $ 66 to balance its budget in 2021, according to estimates by the International Monetary Fund.
|IMF Break even Oil price in $ / barrel (in April 2020):|
|United Arab Emirates||67||69||61|
Saudi Arabia’s cautious pricing comes as oil giants, notablyBP Plc and Total SE predict that the era of increasing global energy demand isor comes to an end in just a decade.
This is of particular concern for countries like Saudi Arabia, where oil accounted for nearly two-thirds of government revenue in 2019. In the second quarter, Saudi profits ofCrude exports have fallen to their lowest on a quarterly basis since at least 2016, despite efforts by the kingdom to spearhead OPEC efforts since May to reduce supply and support prices.
“It looks like they assume some recovery next year, but oil revenues will be stable between 2021 and 2022, and won’t start to rise again until 2023,” said Mazen Al-Sudairy, head of research at Al. Rajhi Capital.
– With the help of Vivian Nereim