Saudi sees higher oil revenue as OPEC curbs boost prices

Bloomberg

Saudi Arabia expects oil revenue to jump 12 percent next year in a sign the world’s biggest crude exporter expects prices to keep rising in 2018. The top OPEC producer expects to collect 492 billion riyals ($131 billion) from oil sales in 2018, compared with 440 billion riyals this year, the Finance Ministry said in a budget statement.
Oil is on course for a second annual gain after the Organization of Petroleum Exporting Countries and its allies agreed to extend production curbs through the end of 2018. Compliance with OPEC cuts rose to 115 percent in November, the highest since the agreement took effect in January, according to the International Energy Agency. Brent crude was trading at $63.98 a barrel at 10:57 a.m. in Dubai, up 13 percent this year.
“Assuming Saudi Arabia will continue to comply with the OPEC production cuts throughout 2018, the budgeted increase in oil revenue reflects an expectation of higher export prices,” said Ziad Daoud, chief Middle East economist for Bloomberg Economics. Higher exports or an increase in oil prices can help to balance the budget, he said.
The 2018 budget is based on an oil price of about $63 a barrel, Bloomberg Economics estimated. Iraq, OPEC’s second-biggest producer, is assuming $46 a barrel for its 2018 budget, pending parliament approval, up from $42 a barrel for this year.
The Saudi government relies heavily on oil sales for revenue, and its finances have taken
a blow since prices started
tumbling in 2014.
The country’s oil exports dropped to 6.8 million barrels a day in October from 8 million at the end of last year. Saudi Arabia stands to now benefit from the rise in oil prices. Total projected revenue next year is at 783 billion riyals, up from 696 billion riyals in 2017. The government intends to spend 978 billion riyals in 2018 compared with 926 billion this year, the Finance Ministry said.
The government is planning to raise local gasoline prices by about 80 percent in January, a person with knowledge of the matter said earlier this month. The kingdom expects its economy to rebound in 2018.
The government plans to raise total spending to 1.1 trillion riyals ($293 billion) from 926 billion in 2017. The increase will help counter revenue-boosting measures, such as the introduction of value-added taxation
and a levy paid by companies
on expat workers. Overall growth is expected to rebound to 2.7 percent after lower oil prices drove a 0.5 percent
contraction in 2017.
Non-oil revenue is expected to rise to 291 billion riyals from 256 billion riyals, with total receipts up 12.5 percent to 783 billion riyals. The government expects the budget deficit to narrow to about 7.3 percent of gross domestic product from almost 9 percent this year.
Saudi Arabia is slowing plans to eliminate subsidies for a wide range of energy products – plans which are key to efforts to make the country use energy more
efficiently — under a new long-term fiscal programme released with 2018 state budget.

Kingdom plans to create national privatisation fund
RIYADH / Reuters

Saudi Arabia’s economy minister said that his country was studying the idea of creating a national privatisation fund to facilitate sales of state assets. “Personally I think it is a valid concept,” Mohammed al-Tuwaijri said in an interview. Such a fund would bundle together state assets and be sold to Saudi citizens at a discount, letting them profit from privatisations; it has been suggested by analysts at State Street Global Advisors and elsewhere.
However, Tuwaijri added that the idea would need many approvals to become reality. He said that among all the state assets earmarked for sale, efforts to sell assets in the water and grains sectors had made the most progress.