{"id":6740,"date":"2023-06-12T16:09:51","date_gmt":"2023-06-12T16:09:51","guid":{"rendered":"https:\/\/euromenaenergy.com\/?p=6740"},"modified":"2023-06-12T16:09:51","modified_gmt":"2023-06-12T16:09:51","slug":"saudi-arabias-oil-cut-risks-leaving-bitter-taste-for-budget","status":"publish","type":"post","link":"https:\/\/emimer.com\/?p=6740","title":{"rendered":"Saudi Arabia\u2019s Oil Cut Risks Leaving Bitter Taste for Budget"},"content":{"rendered":"<p>Saudi Arabia\u2019s plan to slash oil production by around 10% may hit its finances hard.<\/p>\n<p class=\"paywall\">Sunday\u2019s decision, which will see the kingdom lower crude output to 9 million barrels a day next month and perhaps beyond, has failed to boost prices much. Oil futures have risen less than 1% since Energy Minister Prince Abdulaziz bin Salman announced the unilateral cut after an OPEC+ meeting.<\/p>\n<p class=\"paywall\">The prince, speaking in Vienna, described it as a \u201c<a title=\"How Midnight OPEC Dealmaking Won Gulf Unity at Africa\u2019s Expense\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-06-05\/how-midnight-opec-dealmaking-won-gulf-unity-at-africa-s-expense\" target=\"_blank\" rel=\"noopener noreferrer\">lollipop<\/a>\u201d for other members of the producers\u2019 cartel.<\/p>\n<p class=\"paywall\">The kingdom\u2019s fiscal outlook was worsening even before this weekend. The budget was in deficit for the past two quarters as oil dipped, while spending on salaries and massive tourism and infrastructure projects\u00a0<a title=\"Saudi Arabia Budget Slips into Deficit as Spending Accelerates\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-05-07\/saudi-arabia-budget-slips-into-deficit-as-spending-accelerates\" target=\"_blank\" rel=\"noopener noreferrer\">soared<\/a>.<\/p>\n<p class=\"paywall\">The International Monetary Fund estimates Riyadh will need an oil price of<a title=\"Saudi Arabia Needs Pricier Oil to Balance Its Budget, IMF Says\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-05-03\/saudi-arabia-needs-pricier-oil-to-balance-its-budget-imf-says\" target=\"_blank\" rel=\"noopener noreferrer\">\u00a0almost $81<\/a>\u00a0a barrel to balance its books this year, which is above Brent\u2019s current level of around $77.<\/p>\n<p class=\"paywall\">The situation is starker when Crown Prince Mohammed bin Salman\u2019s giga-projects such as the new city of\u00a0<a title=\"MBS\u2019s $500 Billion Desert Dream Just Keeps Getting Weirder\" href=\"https:\/\/www.bloomberg.com\/features\/2022-mbs-neom-saudi-arabia\/\" target=\"_blank\" rel=\"noopener noreferrer\">Neom<\/a>\u00a0are taken into account. The IMF mostly excludes those because they\u2019re largely funded by the sovereign wealth fund and other state entities, rather than directly from the government\u2019s budget.<\/p>\n<p class=\"paywall\">If those are included, Saudi Arabia\u2019s breakeven oil price rises to $95 a barrel,\u00a0<a title=\"Fracturing US-Saudi Oil Pact Adds to Fed\u2019s Inflation Stress (2)\" href=\"https:\/\/www.bloomberg.com\/news\/features\/2023-04-12\/recession-odds-inflation-fears-jump-as-us-saudi-oil-pact-breaks-down\" target=\"_blank\" rel=\"noopener noreferrer\">according<\/a>\u00a0to Bloomberg Economics.<\/p>\n<p class=\"paywall\">The Saudi government is more optimistic and expects to post an annual fiscal surplus of\u00a0<a title=\"Saudi Arabia Says Fiscal Expansion to Balance Out Fed Hikes (1)\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-03-16\/saudi-arabia-says-fiscal-expansion-to-balance-out-fed-tightening\" target=\"_blank\" rel=\"noopener noreferrer\">$4.3 billion<\/a>\u00a0for this year.<\/p>\n<p class=\"paywall\">The kingdom was the fastest-growing economy in the Group of 20 last year, as Russia\u2019s invasion of Ukraine roiled energy markets and pushed oil above $125 a barrel. It also pumped an average of 10.5 million barrels a day, an annual\u00a0<a title=\"Saudi Aramco Posts Blowout Annual Profit and Raises Dividend (2)\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-03-12\/saudi-aramco-posts-blowout-annual-profit-and-raises-dividend\" target=\"_blank\" rel=\"noopener noreferrer\">record<\/a>.<\/p>\n<p class=\"paywall\" data-tout-type=\"story\"><a title=\"Saudi Arabia's Solo Oil Cut Is a Risky Strategy: Javier Blas\" href=\"https:\/\/www.bloomberg.com\/opinion\/articles\/2023-06-05\/opec-aftermath-saudi-arabia-s-solo-production-cut-is-a-risky-strategy\" target=\"_blank\" rel=\"noopener noreferrer\">Saudi Arabia\u2019s Solo Oil Cut Is a Risky Strategy: Javier Blas<\/a><\/p>\n<p class=\"paywall\">The latest production cut means the economy will probably grow 0.7% in 2023 instead of 1%, according to Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC.<\/p>\n<aside class=\"left-rail-newsletter paywall\"><\/aside>\n<p class=\"paywall\">It \u201cwill also increase Saudi Arabia\u2019s budget breakeven oil price if all other things remain equal,\u201d said Malik.<\/p>\n<p class=\"paywall\">Many energy analysts, as well as the Organization of the Petroleum Exporting Countries, expect the oil market to\u00a0<a title=\"OPEC+ Faces Oil Market Torn by Demand Rebound and Recession Fear\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2023-06-01\/opec-faces-oil-market-torn-by-demand-rebound-and-recession-fear\" target=\"_blank\" rel=\"noopener noreferrer\">tighten<\/a>\u00a0in the second half of the year as demand in China and India picks up further. That could bolster prices, outweighing the financial impact on Saudi Arabia of its lost production.<\/p>\n<p class=\"paywall\">But plenty of traders are bearish, saying high interest rates and economic weakness in the US and Europe will weigh on oil prices for at least the rest of the year.<\/p>\n<p class=\"paywall\">Riyadh\u2019s move to lower output is \u201cunlikely to underpin a sustainable price increase,\u201d said Citigroup Inc. analysts including Ed Morse. \u201cDemand is looking weaker and non-OPEC supply stronger by year-end than many analysts had forecast.\u201d<\/p>\n<p class=\"paywall\">If oil doesn\u2019t jump, \u201cwe expect that additional production cuts will be more prolonged and the impact on the fiscal balance will be more negative\u201d for Saudi Arabia, said Amy McAlister, lead economist for Europe, Middle East and Africa at Oxford Economics.<\/p>\n<p class=\"paywall\"><em>\u2014 With assistance by Paul Abelsky<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Saudi Arabia\u2019s plan to slash oil production by around 10% may hit its finances hard. Sunday\u2019s decision, which will see the kingdom lower crude output to 9 million barrels a day next&#8230;<\/p>\n","protected":false},"author":1,"featured_media":6741,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[40,46,48,50,57,68,76,77,78,79,80,82,86,87,88,90,95,96,98,99,103,107,109,111,112,114,121,123,137,139,146,148,153,159,174,176,181,182,184,187,196,201,202,203,209,217,221,222,229,231,232,233,239,241,244,246,249,250,251,252,256,262,263,266,268,277,279,280,283,285,288,300],"class_list":["post-6740","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-oil-gas","tag-alleviation","tag-aramco","tag-athens","tag-athensenergydialogues","tag-baroudi","tag-carbon","tag-climate","tag-climate-change","tag-climateaction","tag-climatechange","tag-closure-of-nuclear","tag-co2","tag-cyprus","tag-decarbonising","tag-decarbonization","tag-democracy","tag-disputes","tag-doha","tag-east","tag-eastmed","tag-egypt","tag-embargo","tag-emissions","tag-energy","tag-energy-market","tag-energyindustry","tag-europe","tag-european-fuels","tag-gas","tag-gazprom","tag-greece","tag-greenenergy","tag-hydrocarbons","tag-international","tag-lebanon","tag-liquefied-natural-gas","tag-maritime","tag-maritime-boundaries","tag-maritime-disputes","tag-mediterranean","tag-natural-gas","tag-offshore","tag-oil","tag-oil-and-gas","tag-opec","tag-peace","tag-plants","tag-pollution","tag-poverty","tag-power","tag-putin","tag-qatar","tag-renewable-energy","tag-reserves","tag-rosneft","tag-roudi","tag-russia","tag-russia-in-the-european-energy-sector","tag-russian-gas","tag-russian-sanctions","tag-saudi","tag-solar","tag-solar-power","tag-straddling","tag-sustainability","tag-total","tag-trump","tag-turkey","tag-ukrain","tag-unclos","tag-usa","tag-300"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/6740","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6740"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/6740\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/6741"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6740"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6740"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6740"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}