The Clap
The International Monetary Fund (IMF) stated that Saudi Arabia needs a “high oil price” with an average of $96.20 per barrel to achieve a budget balance.
This is based on the assumption that the country maintains a nearly steady crude oil production level close to 9.3 million barrels per day during the current year.
Higher Price
The “96.2 dollars per barrel” level is 21% higher than the IMF’s previous forecasts in October.
At that time, it was expected that the Kingdom would pump 10 million barrels per day in 2024.
It also exceeds the current price of futures contracts for the global benchmark Brent crude, which’s trading near $89 per barrel.
So What
The government needs significant revenues to fund Crown Prince Mohammed bin Salman’s “ambitious transformation plans.”
These include “spending on everything” from future projects like NEOM to attracting globally renowned sports players.
Some Context
The “world’s largest crude oil exporter” leads the efforts of the OPEC+ alliance in production cuts to avoid global oil surplus and support prices.
This has led to reductions of a million barrels per day since last July.
These measures have helped stabilize the market, while Riyadh continues to sacrifice sales volume.
Now What
OPEC and its partners are scheduled to meet on June 1st to consider whether to continue cutting supplies during the second half of this year.
Some analysts expect OPEC+ to start easing restrictions amid increased competition in the Middle East for oil prices.
According to the IMF report, if Saudi Arabia increases its oil production to 10.3 million barrels per day in 2025, the required price to obtain the necessary revenues to finance its budget will be $70.84 per barrel.
