RIYADH, 26 November 2004 — High oil prices extending into next year will ensure healthy government surpluses in 2005 for Saudi Arabia, the world’s biggest crude exporter, Saudi British Bank (SABB) said in an economic report. It predicted a surplus of SR80 billion ($21.33 billion) in 2004, based on revenues of 340 billion and expenditure of 260 billion, narrowing to a SR45 billion surplus in 2005.
“While 2005 may show falls in oil revenues from the highs of this year, it is unlikely that market conditions will take us bank to the situation in, for example, 2003,” the bank said in its economic bulletin for the third quarter of 2004.
Saudi Arabia has boosted oil production to 9.5 million barrels per day (bpd) in an effort to cool soaring world oil prices. But demand from China and production problems in Iraq have kept those prices close to record highs.
Assuming Saudi Arabia maintains 9.5 million bpd production for the rest of the year and prices do not slump, SABB said the Kingdom’s 2004 oil revenues would rise around 16 to 18 percent.
That would take them to SR290 billion or SR295 billion, and total government revenue to SR335 billion or SR340 billion. “2004 may not prove to be too exceptional ... it is unlikely that there will be a major collapse in the market (in 2005),” the bank added.
It predicted Saudi oil production would remain above 8.5 million bpd, with slightly lower world oil prices. “At this stage the forecast is for around a 10 percent drop in government oil revenues taking total government revenues down to approximately 310 billion in 2005,” it said.
SABB’s forecast compared with estimates from Riyad Bank which last month predicted government revenues would reach SR427 billion this year before slipping back in 2005 to SR398 billion. SABB said the healthy fiscal surpluses were beginning to cut banks’ holding of government debt.