Article written by Irina Slav, OilPrice
Despite the oil price’s historic collapse over the past six months, one which saw the price of a barrel drop to a negative price, Saudi Arabia appears more optimistic about the future of oil prices, according to Goldman Sachs analysts.
Sachs analysts have calculated that the Saudi budget plan is based on a Brent average of $50 a barrel between 2020 and 2023. Goldman believes the price of Brent could even rise up to $65 in 2021.
However, even at $50 a barrel, Brent would be cheaper than it needs to be for KSA to balance its budget. The global pandemic has also left ever-lasting harm to the Saudis economy, as the the governor of the Saudi Arabian Monetary Authority said its countries financial outlook for the year remained “uncertain”.
In July, the International Monetary Fund (IMF) said that the price plunge and the oil production cuts would hit oil exporters in the Middle East and North Africa hard. With renewed tightening of movement restrictions in Europe coming to pass last week, while for the America’s a second lockdown seems inevitable, the oil rebound may be slow to form.
KSA is the biggest oil producer in the Gulf, and even with its extremely low costs of production, the kingdom still had a $29 billion deficit for Q2. A tripling of the VAT, an elimination of the “living allowances”, and a delay in public spending are all negative consequences of this deficit.
Brent closed below $40 a barrel at the end of last week and with Libya ramping up oil production with lightning speed, it may be a while before the benchmark recovers to the Kingdoms liking.
Works Cited:
https://www.zerohedge.com/commodities/saudi-arabia-sees-oil-50-until-2023
https://www.bnnbloomberg.ca/saudi-arabia-pegs-budget-to-oil-staying-around-50-until-2023-1.1503449