Saudi Arabia needs oil price near $100 to breakeven: IMF

April 19, 2024 (MLN): Saudi Arabia 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, according to the International Monetary Fund.

Meanwhile, if the kingdom relaxes the supply cuts and boosts production to 10.3m barrels a day next year, its break-even price requirement would fall considerably to $84.70 a barrel, according to the IMF.

The Saudis have led the OPEC+ alliance in curbing output to stave off a global crude surplus and shore up prices, deepening cutbacks by 1m barrels a day since last July, as Bloomberg reported.

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 01 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 hundreds of billions of dollars on everything from futuristic cities like Neom to top-flight sports players.

The government has resorted to debt as a way of bridging some gaps, selling $12bn of bonds in January, equivalent to more than half the fiscal deficit projected for this year.

Neom is also planning a debut riyal bond sale later this year as it looks for more sources of funding, Bloomberg reported this week.

The kingdom’s quest for foreign direct investment has so far under-delivered.

The government wants to hit $100bn of FDI annually by 2030, a haul roughly three times bigger than it has ever achieved and about 50% more than what India gets today.

Kazakhstan and Iran, fellow OPEC+ members, also saw their price needs climb, according to the IMF’s calculations.

But the break-evens for several others in the group, which haven’t made such deep output sacrifices as the Saudis, remained broadly stable or even decreased.

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