Saudis Not Getting Bullish About Oil for 2020

(Bloomberg) -- A year after a rare bullish call on oil, Saudi Arabia isn’t counting on much of an uplift from crude prices in 2020.
The world’s biggest oil exporter has designed next year’s budget under the assumption that Brent will average about $65 per barrel, according to calculations by Ziad Daoud, Bloomberg’s chief economist in the Middle East. EFG Hermes puts the budget’s assumed oil price at $60 to $62, while Capital Economics has it between $55 and $60.
That’s barely higher than where the global benchmark crude traded on Tuesday and compares with a price of $80 that was originally built into Saudi Arabia’s public finances for 2019. Saudi Arabia doesn’t disclose its oil-price assumption.
Analysts see Brent at just under $61 a barrel next year, according to the median of forecasts compiled by Bloomberg.
“The budget this time around is based on a more realistic oil-price assumption,” Daoud said. “The basing of last year’s budget on an extremely bullish assumption for crude was an aberration because of a sharp decline in prices that wasn’t reflected in the final budget.”
Saudi Arabia has led a campaign to support crude prices, surprising the oil market last week with deeper production cuts after talks in Vienna with OPEC and its partners. For next year, the kingdom sees a wider budget deficit and projects its oil revenue at 513 billion riyals ($137 billion), a decline of almost 15% from 2019, according to plans unveiled on Monday.
“The widening of the deficit, despite spending cuts, is a clear reflection of the fiscal challenges facing the Saudi budget at current oil prices,” said Mohamed Abu Basha, head of research at Cairo-based investment bank EFG Hermes.
With its campaign to diversify the economy and efforts within OPEC, Saudi Arabia’s focus is on trying to “bring stability” to its revenue and the market, Finance Minister Mohammed Al Jadaan said in an interview.
The kingdom would need oil to trade at $89 to balance its budget in 2020, according to Bloomberg Economics, higher than the International Monetary Fund’s estimate in October.
IMF Breakeven Oil Prices in $/bbl |
Country |
2018 |
2019 |
2020 |
Iran |
82 |
155.6 |
194.6 |
Iraq |
45.4 |
62.5 |
60.3 |
Kuwait |
54.2 |
54.3 |
54.7 |
Saudi Arabia |
88.6 |
86.5 |
83.6 |
United Arab Emirates |
66.7 |
70.2 |
70 |
Saudi Arabia, which needed the highest oil price to balance its budget in 2018 of any OPEC producer in the Gulf, is the only regional member of the group forecast by the IMF to cut its breakeven both this year and next.
--With assistance from Yousef Gamal El-Din and Vivian Nereim.
To contact the reporter on this story:
Abeer Abu Omar in Dubai at aabuomar@bloomberg.net
To contact the editors responsible for this story:
Lin Noueihed at lnoueihed@bloomberg.net
Paul Abelsky
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Shell CEO Says World 'Desperately In Need' Of Natural Gas
- Fate Of $8Bn Alaska Oil Project To Be Resolved In Next 30 Days
- Gov't Tampering Puts Australian Gas Market In Unenviable Position
- Texas Power Outages Increase As Ice Storm Persists
- Oil And Gas Firms Need To Accelerate Shift To Low Carbon Energy
- Shell's Record Earnings Draw Angry Reactions
- Lukoil Hits 50 Million Tons Of Hydrocarbon Production In Caspian Sea
- TotalEnergies, Air Liquide To Make Heavy-Duty Hydrogen Stations
- Capricorn Reshapes Its Board of Directors
- NSTA's Energy Pathfinder Proving Its Worth
- What Bad Habits Should Oil and Gas Jobseekers Avoid?
- New SPR Bill Passes House
- Biden To Support ConocoPhillips Alaska Oil Project, Defying Greens
- USA Drops 3 Gulf of Mexico Rigs
- USA Oil and Gas Employs Almost 1 Million in 2022
- Shell Makes Host of Company Changes
- Energy Services Sector Will Grow To $1 trillion In 2025
- Libya Sees More Deals After Eni's $8B Gas Investment
- New Discoveries Make 2022 Highest Value Year In Over A Decade
- $1 Trillion Green Investment Matches Fossil Fuels For First Time
- Valaris Employee Reported Missing from Rig
- Louisiana, Texas To Gain Thousands of Energy Jobs At Start of 2023
- Gasoline and Diesel Prices Expected to Fall
- Is the USA Shale Boom Over?
- Higher Oil Prices Have Not Led to More Exploration
- Shell Finds Gas In Pensacola High-Impact Well Off UK
- Iran Oil Gushes Into Global Market
- Will Oil Hit $100 Per Barrel in 2023?
- Eni, Chevron Make Significant Gas Discovery Off Egypt
- What Bad Habits Should Oil and Gas Jobseekers Avoid?