Latest news with #GulfKingdom
Zawya
04-06-2025
- Business
- Zawya
After output rise and price fall…what happens to Saudi budget?
When Saudi Arabia released its 2025 budget late last year, it projected oil production at more than 9 million barrels per day (bpd) and prices at around $70/barrel, envisaging a deficit of 101 billion Saudi riyals ($27 billion). Its production forecast is somewhat true as the world's dominant crude exporter is expected to pump around 9.4 million bpd as per estimates by the Riyadh-based Jadwa Investment company. But prices have dipped below that level, reflecting the Gulf Kingdom's failure to foretell their exact direction, which is largely influenced by market conditions and other factors, the latest of which are the planned increase in US tariffs on global imports. 'You cannot predict the exact actual deficit right now…but I don't think it will go down in the current global circumstances…rather it may go up,' said Jamal Banoun, head of the Riyadh-based SMC consultancy centre. In a study sent to Zawya Projects, Jadwa expected Saudi oil output at 9.4 million bd this year, an increase of around 400,000 bpd from 2024. 'We have revised our forecast for Brent crude to $67 a barrel in 2025 as US tariff policy stabilises somewhat, US shale production plateaus and OPEC Plus production growth slows later in the year…higher volumes will offset part, but not all, of lower prices in Saudi Arabia's revenues,' it said. Over the past 10 years, the price of Saudi crude has averaged around $70 a barrel but the breakeven price needed to balance the Gulf Kingdom's budget has remained above $90 a barrel, which is almost impossible to achieve in the present situation, said Saeed Al-Shaikh, a former Shura (appointed parliament) member and ex-chief economist at the National Commercial Bank, now Saudi National Bank (SNB). He told Zawya Projects that the price needed to keep that deficit in check is around $70 provided spending is restrained and non-oil export earnings continue to grow. Another Saudi analyst said the Kingdom's non-oil income has grown enough in the past decade to somehow shield its fiscal system against extreme price fluctuations. 'Reports speak about an average oil prices of $65-75 this year…this is not a high price but we have to note that there has been a radical change over the past 10 years when the Kingdom's Vision 2030 was launched,' said Ihsan Buhlaiga, a former member of Shura council (appointed parliament). 'We can see that the influence of fluctuating oil prices on the Kingdom's public spending and development plans has noticeably receded,' he added. Citing government data, Buhlaiga said non-oil revenues nearly tripled from around SAR 166 billion ($44 billion) in 2015, the year before Vision 2030 was launched, to SAR 503 billion ($134 billion) in 2024. 'What is re-assuring is that non-oil revenues appear on their way up to the targeted level of SAR1 trillion ($266 billion) by the end of Vision 2030,' he added. In a previous study, Jadwa expected the 2025 budget shortfall to edge up to around SAR127 billion ($33.8 billion) by the end of the year but the study was based on an average crude price of around $75 a barrel. Budget performance in the first quarter may have set the direction for the final annual result but all this depends on geo-politics and other factors that may influence prices. During the first quarter, the budget deficit leaped fourfold due to lower oil export earnings. It stood at SAR59 billion ($16 billion) against $3.3 billion a year before. Revenues fell 10 percent to SAR264 billion ($70 billion) while spending swelled by around five percent to SAR322 billion ($86 billion), the Finance Ministry said. Despite its massive overseas assets, now close to $1 trillion, Saudi Arabia has shunned withdrawal from the reserves, opting instead for borrowing. Its public debt has nearly doubled over the past seven years to reach around SAR1.3 trillion ($347 billion) at the end of March from SAR560 billion ($149 billion) at the end of 2018, the Ministry said . The debt is forecast to surge in the next two years due to a projected budget deficit, boosting its ratio to GDP to one of its highest levels of around 33.5 percent at the end of 2026 from 17.6 percent at the end of 2018, Jadwa noted. (Reporting by Nadim Kawach; Editing by Anoop Menon)
Zawya
13-05-2025
- Business
- Zawya
Trump returns to Saudi with eye on oil prices
When former US President Joe Biden rushed to Saudi Arabia in mid-2022 to seek help in lowering soaring oil prices, his trip backfired. Just after he left empty handed and rebuffed, prices rocketed above $100 a barrel to the delight of the Saudis and the anger of the Americans. It was an exceptional year for Saudi Arabia which basked in a massive fiscal surplus of nearly $28 billion and saw its economy swelling by $235 billion. History is repeating itself as President Donald Trump arrives in the Gulf Kingdom on Tuesday. But trump comes at much more favorable conditions. Oil prices are now hovering at just above $60 a barrel and the decline was partly of his own making and also as a result of OPEC Plus decision last week to lift output. The lucky Trump made his first visit to Saudi Arabia as US president in 2017, when crude prices averaged around $55 a barrel. He again met Saudi Crown Prince Mohammed bin Salman at the G20 summit in Osaka, Japan, in June 2019 and later called him 'a friend of mine'. US-Saudi ties remained strong with Trump in the White House and perhaps Crown Prince MBS reciprocated the US President's feelings. That was perhaps the main reason that prompted MBS to make his $600-billion US investment pledge in January. 'The recent decision by Saudi-led OPEC Plus to increase production by 411,000 barrels per day was a positive message to Trump,' said Nabil Al-Marsoumi, an energy and economics professor at Iraq's Basra University. 'I believe this change in the strategy is intended by Saudi Arabia and other producers to establish good relations with the US under Trump, who has repeatedly called on the Saudis and other producers to lower prices,' he told Zawya Projects. A former Saudi Aramco official wrote in the local press on Monday that very low oil prices would hurt US producers and that Trump would not want this to happen. Faisal Al-Fayeq, ex-marketing chief in Asia and the Pacific, noted that Trump promised during his 2024 election campaign to push oil prices down from their $80 level. 'It seems that Trump now realises that very low prices are not good because they will not support his target to increase domestic crude production,' Al-Fayeq said. Al-Fayeq referred to recent statements by the CEO of the US-based oilfield services company Liberty Energy, in which he warned that prices at $60 would not provide an encouraging environment for oil investment and that a $50 price would hamper production plans and reduce the number of oil rigs in the US. Al-Fayeq, a former economist in OPEC, said the number of rigs did decline in the past weeks to reach 479 at the start of May from 482 in early 2025. 'Oil prices in the $70-$80 range have long been considered a balance between preserving investment and ensuring consumers are not burdened….but recent developments have revealed a more difficult reality: this range was never ideal, but rather the minimum necessary for the industry to remain on its feet,' he said. Another Saudi analyst said he believes Trumps visit to Riyadh carries significant economic and political dimensions for the US, Saudi Arabia, and the world on the grounds it would help stabilise oil markets. 'Economically, Saudi Arabia is one of the largest players in global energy markets and key factor in the stability of the oil market. Any political or economic rapprochement between Washington and Riyadh could affect oil price and supply trends, impacting international markets and global companies,' said Jamal Banoun, a well-known Saudi economist who heads the Riyadh-based SMC Consultancy Centre. 'Furthermore, such visits often witness the signing of major economic deals, including investments in vital sectors such as technology, defense, and renewable energy, which boost capital flows and create new economic opportunities.. this visit is not merely a protocol meeting for the Saudis and Trump…it carries economic and political implications that extend far beyond the borders of both countries,' he told Zawya Projects. (Reporting by Nadim Kawach; Editing by Anoop Menon)
Zawya
12-05-2025
- Business
- Zawya
Saudi Modon reports surge in 2024 investment
The Saudi Authority for Industrial Cities and Technology zones (Modon) has reported one of its best years in 2024, with incoming investments surging by nearly 38 percent. The Authority said in its annual report released last week that total investments received by its industrial cities in 2024 reached around 24 billion Saudi riyals ($6.5 billion). The new capital boosted the total investments in Modon's 39 industrial and technology zones in the Gulf Kingdom to around SAR440 billion ($117 billion), the report said. Companies and factories in these zones peaked at around 8,616 at the end of 2024 while jobs provided by the cities exceeded 593,000. 'The combined developed areas in these cities also increased by around 7 percent last year to reach nearly 219 million square metres,' the report said, adding that the Authority finalised 875 new industrial, logistics and investment contracts last year. (Writing by Nadim Kawach; Editing by Anoop Menon) (
