Saudi Arabia’s goal is long-term oil market stability, while the Kingdom is always ready for multiple oil price scenarios, Saudi Minister of Economy and Planning, Faisal Alibrahim, said on Tuesday.
“We’re always ready for scenarios – multiple scenarios, and we have buffers,” Alibrahim said at the Qatar Economic Forum in Doha.
“We have the long-term fiscal planning and medium-term frameworks that help us adjust depending on what scenario actually plays out,” the Saudi official added.
On the energy markets and oil, Saudi Arabia has always looked at the long game of long-term market stability, which allows for investments in adequate supply to meet global demand, Alibrahim noted.
Early this month, the OPEC+ group led by Saudi Arabia agreed to raise collective output by 411,000 barrels per day (bpd) in June, nearly triple the volume originally scheduled. The move follows a similar surge announced for May and signals a sharp reversal from OPEC+ efforts to defend oil prices.
The OPEC+ producers that are cutting output cited once again “current healthy oil market fundamentals” as the basis for their decision to continue boosting production by larger volumes per month than previously expected.
The latest OPEC+ production policies suggest that Saudi Arabia is willing to endure a short-term pain with lower oil prices to punish the overproducers in the OPEC+ deal and to start spoiling the shale party in the United States. In America, shale producers are cutting spending and scaling back drilling activity with WTI oil prices close to or lower than the breakeven price for profitably drilling a new well.
Meanwhile, Saudi Arabia needs oil prices at $91 per barrel to balance its budget, according to the International Monetary Fund (IMF).
With many uncertainties about global trade and economic and oil demand growth, the Kingdom may have to endure a prolonged period of lower-than-breakeven prices and raise its public debt. Borrowing will have to increase to cover planned expenditures, or spending on some mega projects and Vision 2030 programs could be delayed or reduced, analysts say.
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com
