An average 2014 oil price of $81/b for Saudi export crude, or about $85/b for Brent, is likely to be needed for Saudi Arabia to balance state revenues with government spending in the coming year as oil production declines to 9.3 million b/d, Jadwa Investment said Tuesday.
In a research report on the kingdom's 2014 budget, announced Monday, the Saudi investment bank nonetheless forecast a budget surplus of Saudi riyals 140.8 billion ($37.45 billion), equivalent to 4.8% of expected GDP.
"This is because we expect the oil price to be higher than that used in the budget and therefore that oil revenues will exceed the budgeted total," Jadwa said.
It forecast total Saudi 2014 oil revenues at riyals 957.8 billion and non-oil revenues at riyals 116.6 billion.
Jadwa calculated that a "conservative" oil price assumption of $67/b for Saudi export crude, or about $71/b for Brent, was consistent with the 2014 Saudi budget.
It currently forecasts a 2014 average of $100/b for Saudi export crude, equivalent to about $104/b for Brent.
"With output from Iraq, Iran, Libya and non-OPEC countries expected to steadily rise over the course of next year, we maintain our view that the kingdom's oil production will gradually fall in 2014 to 9.4 million b/d," the bank said.
The latest Platts survey of oil production shows Saudi Arabia pumped 9.75 million b/d of crude in October and November, down from 10 million b/d in each of the previous two months.
Saudi Arabia on Monday announced a record budget of $228 billion for 2014, up from $218.7 billion for 2013. It said it expected the coming year's budget to be balanced.
Riyadh also reported an actual $54.9 billion surplus for 2013, far below the $613 billion forecast, after spending significantly exceeded budget projections and the kingdom used part of its large oil revenue windfall to repay public debt.
Jadwa said it expected government spending again to be higher than the budget projection for 2014, but not as much as in the past 10 years, when spending has averaged 24% more than the level budgeted.
"The extent of overspending eased in 2013, when it was 12.7%, the lowest level since 1999," the bank said.
"Given the more prudent expenditure control together with the low rise in spending budgeted for 2014, we expect that actual spending in 2014 will be relatively close to the budget projection, leading to a total expenditure of riyals 932 billion," it said.
Jadwa also said it expected rising domestic gas production to take some of the burden from oil as the fuel for domestic energy consumption next year.
It pointed to recent data published by the Riyadh-based Joint Oil Data Initiative showing that Saudi domestic crude consumption for the first nine months of 2013 fell by 9% year on year.
