Higher oil prices slash Saudi deficit

The Saudi Finance Minister has announced an annual decline in the budget deficit for the first half of the year thanks to higher oil prices in the period.

At US$19.39 billion (72.728 billion riyals), the first-half deficit was 51% lower than what the government had projected, the ministry also said. Total budget revenues in the period rose by 29% on an annual basis while expenditures fell by 2%. Over the second quarter, the deficit fell on an annual basis but rose on a quarterly basis, Reuters noted in a report of the ministry’s announcement, recalling that the Kingdom had projected a full-year deficit of US$52.80 billion (198 billion riyals), or 8% of GDP, compared with US$79.2 billion (297 billion riyals). Oil revenues rose by 28% over the second quarter, while overall revenues were up by a more moderate 6% on an annual basis.

Saudi Arabia has been relentless in its attempts to prop up international oil prices more consistently, while at the same time publicizing its progress in diversifying away from oil and into other industries, including renewable energy. Recently, the Kingdom launched a tender for the construction of a 400-MW wind farm as part of an initiative to build 9.5 GW of renewable capacity by 2023. Meanwhile, Riyadh has been trying to rein in its OPEC co-members that are falling short of their production targets set out in the November deal, and pledging to cut its own exports to compensate for increases from other members of the cartel. At a St. Petersburg meeting of oil ministers last month, Saudi Arabia said it would cut its exports to 6.6 million barrels from August but TankerTrackers data for the first week of the month revealed no cuts have been made, except to China.

Last week, reports emerged that Saudi Arabia would cut its crude oil exports to Asian clients by as much as 1 million bpd. That smacks of desperation as the Asian market is key for every crude oil exporter, and market share there is precious. Yet, the Kingdom seems to be willing to risk more of its market share to keep prices where they are or, hopefully, push them higher.

Source: Irina Slav for Oilprice.com