Saudi Arabia’s oil revenues are flowing in at the highest rate in three years, Bloomberg reports, thanks to the strong price recovery since the start of this year.
Revenues from oil hit $19 billion in July, according to Bloomberg data, which was a considerable improvement on last year, when revenues—like revenues across oil-producing nations—plunged, hurting their economies. For OPEC’s largest producer, the trough was reached in May-April last year, when oil revenues plunged to around $7 billion.
Revenues have risen in tune with production. According to another Bloomberg report, Saudi Arabia is already close to pre-pandemic production levels of 9.8 million barrels daily, and oil demand is still rising fast. This bodes well for next year’s revenues, too.
“OPEC+ has had a very good year,” Ben Luckock, co-head of oil trading at Trafigura, told Bloomberg. “They have delivered: they have managed to thread the needle.”
As a result, Saudi Arabia now expects to shrink its budget deficit to just 1.6 percent of GDP in 2022, with 2022 revenue 4.5 percent higher than earlier projections. The Kingdom, however, has no plans to boost spending despite this much better outlook. This year’s deficit is seen at 2.7 percent of GDP—a lower figure than the finance ministry had initially planned for.
Saudi Arabia is not alone in its oil triumph. All the members of the Gulf Cooperation Council and fellow OPEC members are this year doing quite a lot better than they did last year. Last year, economic growth shrunk, debt surged, and the outlook was dire, especially over the long term because of the energy transition.
While some CGC members still have a fiscal breakeven oil price above current benchmark prices—Bahrain and Oman—all have benefited from the price rally this year that has seen Brent crude add some 50 percent since the start of the year.
By Charles Kennedy for Oilprice.com
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Saudi Arabia doesn’t need to invest in new arms purchases from the United States to curry favour with the Americans. It is far better for it to end the Yemen war and reach a rapprochement with Iran and use the bulk of its oil revenues to accelerate the diversification of its economy.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London