26 December 2014 – Opec giant Saudi Arabia’s 2015 budget is probably assuming an oil price of $80 a barrel, and will be seen as a sign of confidence in the market, according to a former economic adviser to the country’s government.The assumption is down from $103 a barrel for this year, John Sfakianakis, who used to be chief economic adviser to Saudi Arabia’s Ministry of Finance, told Bloomberg after the budget was announced on Thursday.
The world’s biggest crude exporter set 2015 spending at 860 billion riyals ($229 billion) with revenue falling to 715 billion riyals from 1.046 trillion riyals in 2014, the Finance Ministry said.
Oil, which has slumped 47% this year, accounted for 89% of Saudi Arabia’s 2014 revenue.
Iraq, the second-biggest producer in Opec, said this week its 2015 budget is based on $60 oil, Bloomberg reported.
“Everyone was expecting to see a budget built on a price around $60 but that would have sent a negative message to the oil market,” Sfakianakis told the news wire.
“With a fiscal break-even price of $80 a barrel, the government is sending a message to the market that we are expecting to see a rebound in oil prices.” Sfakianakis is Middle East director at London-based Ashmore Group Plc.
Saudi Arabia is confident that crude prices will rebound with global economic growth boosting demand as high-cost producers cut back, Oil Minister Ali Al-Naimi said on 21 December.
“I’m 100% sure prices will go up, they have no other direction but to go up.”
Saudi Arabia has 265 billion barrels of oil reserves, with production of 9.65 million barrels per day in November, according to data compiled by Bloomberg. Iraq was pumping 3.35 million barrels.
Opec’s decision to maintain output at its 27 November meeting in Vienna fanned speculation that Saudi Arabia and other members want North American shale drillers and other producers outside the group to be the first to cut production.
Saudi Arabia and Iran this month cut the official price levels of their main light crude grades for sale to Asia to the lowest in at least 14 years.