Saudi Arabia forecasts oil revenues to increase 80% by 2023
Saudi Arabia’s plan to delete its budget deficit by 2023 relies on the increase in Oil Revenues over the next six years. That is what Saudis predict, according to unnamed sources. Plans are for the Kingdom to boost its output to a level that, combined with an assumption of higher oil prices, will allow Riyadh to book its first budget surplus since 2013. The six-year program to balance the budget foresee a rise in oil prices and output able to push income from oil sales from $117 billion to $214 billion. It assumes the price of oil will reach $75/bbl.
Crown Prince Mohammed bin Salman’s plan is to transform the economy to reduce its reliance on oil in the long term and to do that he needs higher crude prices to support growth while introducing measures that would help boost revenue from other sources. In order to be able to take full advantage of higher prices Saudi Arabia plans to rise crude oil production to 11.3 million bpd in six years. This year, the daily average will stand at 10 million barrels, because the country is bound by its participation in the OPEC-wide production cut and has to regulate its production up and down to compensate for laggards countries such as Iraq.
Monica Malik, chief economist at Abu Dhabi Commercial Bank about the oil revenue forecast said: “it looks challenging given the development in the shale industry” […] “The strong oil revenue growth in 2017 will be difficult to repeat.”
Economy Minister Mohammad Al Tuwaijri, said that the kingdom “found it appropriate to move to a more optimistic scenario” in fiscal planning. “We’re very satisfied with what happened in 2017, and we’ll continue on this journey.” The budget deficit narrowed to about 9 percent of GDP this year. Authorities expect oil production to increase from an average of 10 MMbpd this year to 11.03 MMbpd in 2023. For 2020, they predict output of 10.45 MMbopd, generating 161 billion dollars in revenue.
Despite some suggestions to the contrary, OPEC’s number-one producer has no intention of making the production cut permanent, and that very well underlines the significance of the exit strategy that OPEC officials are already working on. The exit would have to be very gradual indeed, and will have to be combined with lower production elsewhere if prices of US$75 a barrel are to become a reality as per the Saudi six-year plan.
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