Saudi Arabia Needs Oil Price Near $100, IMF Says
Saudi Arabia will need a higher oil price than previously thought this year as the OPEC+ leader spearheads the group’s production cuts, according to the International Monetary Fund.
(Bloomberg) -- Saudi Arabia will need a higher oil price than previously thought this year as the OPEC+ leader spearheads the group’s production cuts, according to the International Monetary Fund.
Riyadh will require an average oil price of $96.20 a barrel to balance its budget, assuming it holds crude output steady near 9.3 million barrels a day this year, the Washington-based Fund said in its regional economic outlook on Thursday.
That’s up 21% from a previous forecast in October, when the IMF predicted that the kingdom would pump 10 million barrels a day in 2024. It’s also higher than the current price for international benchmark Brent futures, which are trading near $87 a barrel in London.
The Saudis have led the OPEC+ alliance in curbing output to stave off a global crude surplus and shore up prices, deepening cutbacks by 1 million barrels a day since last July. The measures have helped buoy the market, but as Riyadh sacrifices sales volumes it need a higher price to compensate.
The Organization of Petroleum Exporting Countries and its partners will gather on June 1 to consider whether to continue to supply curbs into the second half of the year. With conflict in the Middle East bolstering the market, some analysts expect that OPEC+ may start to unwind the curbs.
The kingdom needs considerable revenue to fund the ambitious transformation plans of Crown Prince Mohammed bin Salman, which involve spending on everything from futuristic cities like Neom to top-flight sports players.
Kazakhstan and Iran, fellow OPEC+ members, also saw their price needs climb but several other coalition members — which haven’t made such deep output sacrifices as the Saudis — remained broadly stable or even decreased.
Assuming the kingdom relaxes the supply cuts and revives production to 10.3 million barrels a day next year, its break-even price requirement should subside to $84.70 a barrel, according to the IMF.
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