Saudi Arabia is confident that crude prices will rebound with global economic growth boosting
demand as high-cost producers cut back, Oil Minister Ali al-Naimi said on December 21. “I’m 100% sure prices will go up, they have no other direction but to go up.”
Bloomberg
Saudi Arabia’s 2015 budget is probably assuming an oil price of $80 a barrel, and will be seen as a sign of confidence in the market, according to a former economic adviser to the country’s government.
The assumption is down from $103 a barrel for this year, John Sfakianakis, who used to be chief economic adviser to Saudi Arabia’s Ministry of Finance, said by phone after the budget was announced on Thursday. The world’s biggest crude exporter set 2015 spending at 860bn riyals ($229bn) with revenue falling to 715bn riyals from 1.046tn riyals in 2014, the Finance Ministry said. Oil, which has slumped 47% this year to $60.23 a barrel in London, accounted for 89% of its 2014 revenue.
Brent crude tumbled into a bear market this year as the US pumped the most oil in more than three decades, leading the UAE Energy Minister Suhail al-Mazrouei to urge producers from outside the Organisation of Petroleum Exporting Countries to trim output. Iraq, the second-biggest producer in Opec, said last week its 2015 budget is based on $60 oil.
“Everyone was expecting to see a budget built on a price around $60 but that would have sent a negative message to the oil market,” Sfakianakis said from Riyadh. “With a fiscal break even price of $80 a barrel, the government is sending a message to the market that we are expecting to see a rebound in oil prices.” Sfakianakis is Middle East director at London- based Ashmore Group.
Saudi Arabia is confident that crude prices will rebound with global economic growth boosting demand as high-cost producers cut back, Oil Minister Ali al-Naimi said on December 21. “I’m 100% sure prices will go up, they have no other direction but to go up.”
US stockpiles climbed 7.27mn barrels in the week ended December 19 as imports surged, according to the Energy Information Administration.
Saudi Arabia has 265bn barrels of oil reserves, with production of 9.65mn bpd in November, according to data compiled by Bloomberg. Iraq, the second-biggest producer, was pumping 3.35mn barrels.
Opec’s decision to maintain output at its November 27 meeting in Vienna fanned speculation that Saudi Arabia and other members want North American shale drillers and other producers outside the group to be the first to cut production. Saudi Arabia and Iran this month cut the official price levels of their main light crude grades for sale to Asia to the lowest in at least 14 years.
