Saudi economy returns to growth on back of oil price rises

View of the production facility at Saudi Aramco’s Shaybah oilfield in the Empty Quarter, Saudi Arabia May 22, 2018. (Reuters)
Updated 05 June 2018
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Saudi economy returns to growth on back of oil price rises

  • The world’s top crude exporter has seen a key boost in its revenues after the recovery in oil prices
  • Oil prices surged to around $80 a barrel last month from under $30 a barrel in early 2016

DUBAI: The Saudi economy pulled out of recession in the first quarter of 2018 thanks to oil price rises, a think-tank said Tuesday.
Capital Economics said the oil-dependent Saudi economy grew by 1.5 percent in the first quarter, after having contracted by 0.7 percent in 2017.
“The oil sector was the main driver of the recovery,” the London-based group said.
Oil prices surged to around $80 a barrel last month from under $30 a barrel in early 2016 after OPEC and non-OPEC producers struck a deal to cut output.
As a result of the crash in prices, the economy dipped into negative territory last year for the first time since 2009, a year after the global financial crisis.
The OPEC kingpin has posted a budget deficit in the past four years, and it has borrowed from domestic and international markets and hiked fuel and power prices to finance the shortfall.
It also introduced a five-percent value-added tax from the start of 2018.
The world’s top crude exporter has seen a key boost in its revenues after the recovery in oil prices.
Riyadh-based Jadwa Investment said Monday that Saudi fiscal reserves rose by $13.2 billion in April, marking its largest monthly increase since October 2013.
The reserves stood at $506.6 billion in April, down from $732 billion at the end of 2014.
Since 2014, Saudi budget deficits have totalled $260 billion and the government is projecting a 2018 shortfall of $52 billion.


‘Get prices down’ Trump tells OPEC

Updated 20 September 2018
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‘Get prices down’ Trump tells OPEC

  • Trump highlights US security role in region
  • Comments come ahead of oil producers meeting in Algeria

LONDON: US president Donald Trump urged OPEC to lower crude prices on Thursday while reminding Mideast oil exporters of US security support.
He made his remarks on Twitter ahead of a keenly awaited meeting of OPEC countries and its allies in Algiers this weekend as pressure mounts on them to prevent a spike in prices caused by the reimposition of oil sanctions on Iran.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” he tweeted.
“We will remember. The OPEC monopoly must get prices down now!”
Despite the threat, the group and its allies are unlikely to agree to an official increase in output, Reuters reported on Thursday, citing OPEC sources.
In June they agreed to increase production by about one million barrels per day (bpd). That decision was was spurred by a recovery in oil prices, in part caused by OPEC and its partners agreeing to lower production since 2017.
Known as OPEC+, the group of oil producers which includes Russia are due to meet on Sunday in Algiers to look at how to allocate the additional one million bpd within its quote a framework.
OPEC sources told Reuters that there was no immediate plan for any official action as such a move would require OPEC to hold what it calls an extraordinary meeting, which is not on the table.
Oil prices slipped after Trumps remarks, with Brent crude shedding 40 cents to $79 a barrel in early afternoon trade in London while US light crude was unchanged at about $71.12.
Brent had been trading at around $80 on expectations that global supplies would come under pressure from the introduction of US sanctions on Iranian crude exports on Nov. 4.
Some countries has already started to halt imports from Tehran ahead of that deadline, leading analysts to speculate about how much spare capacity there is in the Middle East to compensate for the loss of Iranian exports as well as how much of that spare capacity can be easily brought online after years of under-investment in the industry.
Analysts expect oil to trend higher and through the $80 barrier as the deadline for US sanctions approaches.
“Brent is definitely fighting the $80 line, wanting to break above,” said SEB Markets chief commodities analyst Bjarne Schieldrop, Reuters reported. “But this is likely going to break very soon.”