Saudi Arabia likely to avert 'first budget deficit on higher oil prices'

Saudi Arabia may avert its first budget deficit in eight years thanks to an increase in prices that could peg the kingdom's average price for oil at $50 a barrel in 2009, according to a study.

The Riyadh Chamber of Commerce and Industry said in a report that the finance ministry was "conservative" in basing its budget outlook on oil at less than $40 a barrel last December amid a price slump.

"The ministry of finance based its projections on the price of oil for less than $40 per barrel, while it is expected that the average price of oil in 2009 will reach $50, and according to optimistic expectations it will exceed $60 a barrel," said the study.

The world's top oil exporter projects a budget deficit of SR65 billion (Dh63.54bn) for 2009, its first since 2001. The government did not outline its assumed oil price for the budget but analysts at the time said it suggested a price of around $37 a barrel for Saudi oil and $43 a barrel for US crude.

"The finance ministry's ... conservatism while producing the budget estimated the revenues to be a lot less than both prevailing and expected (oil) prices," said the study.

Oil prices, which slumped from record peaks around $147 a barrel in July 2008 down to $32.40 a barrel in December, have rebounded and stood at $68 a barrel yesterday.

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