A surge in crude prices and production will boost Saudi Arabia’s oil export earnings by nearly $39 billion to more than $242 billion in 2011 and this will largely widen its current account surplus and official assets.
According to a key investment firm in the Gulf Kingdom, the average price of Saudi Arabia’s crude is projected to surge to $91.7 this year from $77.7 in 2010 while its crude output will swell to 8.8 million bpd from 8.2 million bpd.
The increase will push up the crude export income of the world’s oil superpower to their second highest level after the peak earnings of $281 billion in 2008, when oil prices shot up to their highest average of around $95 a barrel, the Riyadh-based Jadwa Investments said in a study sent to Emirates 24/7.
It forecast the Kingdom’s income would fall back to around $203 billion in 2012, the same level as in 2010, as a result of lower prices and a slight fall in Saudi Arabia’s oil production to around 8.7 million bpd.
Jadwa said the surge in revenue would widen the country’s current account surplus despite an expected rise in imports but added the surplus could drop in 2012 due to higher imports and a projected growth in expatriate remittances.
“Higher oil revenues will result in a much larger current account surplus than we had previously anticipated in 2011. Oil export revenues are forecast to reach $243 billion this year, the second highest on record, lifting the trade surplus to $181 billion and the current account surplus to $93 billion,” the study said.
It showed non-oil exports would also rise owing to higher petrochemical prices, adding that the widening trade balance takes into account the likelihood of higher imports of both consumer goods and construction raw materials and machinery.
“Over the next few years, the planned massive increase in housing will have a negative impact on the current account,” Jadwa said.
“In addition to the need to import the necessary materials, equipment and related services, there is likely to be an increase in the number of expatriate workers required to build the housing, who will probably remit the bulk of their income. We therefore see the current account surplus falling fairly rapidly from 2012.”
Besides the surplus, higher oil export revenue would further boost Saudi Arabia’s official financial reserves, which have sharply grown over the past few years because of higher crude prices and the country’s oil supplies.
The assets, based mostly in the West and controlled by the Saudi Arabian Monetary Agency (SAMA), climbed to one of their highest levels of around $520 billion at the end of 2010 and are expected to soar to nearly $588 billion at the end of this year and an all time high of about $623 billion, Jadwa said.
It also showed the improvement in the Kingdom’s financial situation would allow it to cut its public debt from around SR167 billion in 2010 to SR160 billion at the end of 2011. It expected the debt to remain at that level at the end of 2012.
The reduction will ally with the economic expansion to depress the debt to GDP ratio from 10.2 per cent in 2010 to 8.4 per cent in 2011 after surpassing the GDP in late 1999. It dipped to 65 per cent at the end of 2004 and continued its rapid slide in the following years because of massive fiscal surpluses.
Saudi Arabia recorded its largest ever fiscal surplus of nearly SR581 billion ($155 billion) in 2008 after its total revenues climbed to around SR1,101 million ($293 billion), their highest level in current prices since the Kingdom started exporting oil more than 79 years ago.