Dubai: Saudi Arabia’s 2015 state budget
assumes an oil price close to current levels of around $60 (Dh220) a
barrel for Brent crude, a shift from past budgets which were based on
prices well below market levels, analysts say.
assumes an oil price close to current levels of around $60 (Dh220) a
barrel for Brent crude, a shift from past budgets which were based on
prices well below market levels, analysts say.
The kingdom doesn’t reveal
the oil prices which it uses to calculate its annual budgets. So
analysts estimate them, making assumptions about several other variables
such as planned oil exports and production for the following year.
the oil prices which it uses to calculate its annual budgets. So
analysts estimate them, making assumptions about several other variables
such as planned oil exports and production for the following year.
For the 2015 budget, announced on Thursday, four analysts’ oil price estimates are in a range of $55 to $63.
That does not mean Saudi
Arabia necessarily expects such prices next year — Finance Minister
Ibrahim Alassaf said on Thursday there was a great difference of opinion
over when prices would start rebounding, with some people predicting
the second half of next year and others 2016.
Arabia necessarily expects such prices next year — Finance Minister
Ibrahim Alassaf said on Thursday there was a great difference of opinion
over when prices would start rebounding, with some people predicting
the second half of next year and others 2016.
Instead, the budgeted oil
price is an accounting assumption which the government uses to set a
baseline for next year’s revenues. If Brent crude averages more than $60
next year, Saudi oil revenues will probably be larger than projected;
if Brent is below $60, revenues will be smaller.
price is an accounting assumption which the government uses to set a
baseline for next year’s revenues. If Brent crude averages more than $60
next year, Saudi oil revenues will probably be larger than projected;
if Brent is below $60, revenues will be smaller.
Oil prices have plunged
almost 50 per cent since June, pressuring the finances of producer
countries such as Saudi Arabia, the world’s largest oil exporter.
almost 50 per cent since June, pressuring the finances of producer
countries such as Saudi Arabia, the world’s largest oil exporter.
Its 2015
budget plan projects record spending of $229.3 billion, up 0.6 per cent
from the 2014 budget, while total revenues are projected to drop to
$190.7 billion — leaving a $38.6 billion deficit.
budget plan projects record spending of $229.3 billion, up 0.6 per cent
from the 2014 budget, while total revenues are projected to drop to
$190.7 billion — leaving a $38.6 billion deficit.
In past years, Saudi budgets
commonly based their calculations on oil prices far below current
levels. For example, the 2014 budget assumed an oil price below $70;
when the budget plan was announced, Brent crude was trading at $111.
commonly based their calculations on oil prices far below current
levels. For example, the 2014 budget assumed an oil price below $70;
when the budget plan was announced, Brent crude was trading at $111.
In an interview with Al
Arabiya television on Thursday, Alassaf confirmed his ministry had
departed from past practice and assumed an average 2015 oil price close
to current levels in its latest budget.
Arabiya television on Thursday, Alassaf confirmed his ministry had
departed from past practice and assumed an average 2015 oil price close
to current levels in its latest budget.
“We were realistic in our estimates for next year’s revenues in light of current and expected developments in the oil market.
Maybe over the past years I agree we were conservative, but this year we were realistic,” he said.
Estimates
Leading Saudi investment bank
Jadwa Investment said the 2015 budget was consistent with an average
Saudi export crude price of $56 a barrel next year, equivalent to a
Brent crude price of roughly $60, and oil production at 9.6 million
barrels per day (bpd), in line with the current level.
Jadwa Investment said the 2015 budget was consistent with an average
Saudi export crude price of $56 a barrel next year, equivalent to a
Brent crude price of roughly $60, and oil production at 9.6 million
barrels per day (bpd), in line with the current level.
Analysts at National
Commercial Bank (NCB), the kingdom’s biggest bank, made a slightly
different calculation, saying they believed the budget was based on a
Saudi oil price of $61.
Commercial Bank (NCB), the kingdom’s biggest bank, made a slightly
different calculation, saying they believed the budget was based on a
Saudi oil price of $61.
The oil price assumption in Saudi Arabia’s budget was reduced for the first time since 2009, both Jadwa and NCB said.
Monica Malik, chief economist
at Abu Dhabi Commercial Bank, said the budget seemed to be assuming a
Saudi oil price of $55 and output at 9.5 million bpd. Emad Mostaque,
strategist at Ecstrat, an emerging markets consultancy, estimated $63.
at Abu Dhabi Commercial Bank, said the budget seemed to be assuming a
Saudi oil price of $55 and output at 9.5 million bpd. Emad Mostaque,
strategist at Ecstrat, an emerging markets consultancy, estimated $63.
Mostaque noted that non-oil
revenues this year were $30.7 billion; assuming the same amount next
year implies the government projects oil revenues of $160 billion in
2015, or $438 million a day.
revenues this year were $30.7 billion; assuming the same amount next
year implies the government projects oil revenues of $160 billion in
2015, or $438 million a day.
Saudi Arabia heavily
subsidises its domestic fuel sales so Mostaque based his oil revenue
assumptions on crude exports, which he thinks will be equivalent to 6.9
million bpd next year, in line with current exports. While actual
exports may drop next year, this would be offset by higher revenues from
new Saudi refinery operations that have just come on line.
subsidises its domestic fuel sales so Mostaque based his oil revenue
assumptions on crude exports, which he thinks will be equivalent to 6.9
million bpd next year, in line with current exports. While actual
exports may drop next year, this would be offset by higher revenues from
new Saudi refinery operations that have just come on line.
Dividing daily exports into
revenues gives an oil price assumption of $63.
(http://www.ecstrat.com/research/balancing-budgets/) Jadwa’s oil price
estimate is lower partly because it assumes non-oil revenues — mainly
fees for government services and customs tariffs — will increase next
year in line with a strong economy, so less of the government’s total
revenue projection will come from oil.
Saudi 2015 budget based on oil price around $60 — analysts | GulfNews.comrevenues gives an oil price assumption of $63.
(http://www.ecstrat.com/research/balancing-budgets/) Jadwa’s oil price
estimate is lower partly because it assumes non-oil revenues — mainly
fees for government services and customs tariffs — will increase next
year in line with a strong economy, so less of the government’s total
revenue projection will come from oil.
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