Riyadh, Asharq Al-Awsat—The recent steep drop in oil prices and the continued unrest in oil-producing countries such as Libya and Iraq will not have a direct effect on Saudi Arabia’s current budget, despite possibly impacting its oil revenues, a number of economic and petroleum experts have told Asharq Al-Awsat.
On Friday, the price of Brent crude was sent tumbling to 104.84 US dollars per barrel, its lowest level since April 2, on the back of continued unrest in oil-producing Libya and Iraq. However, prices rallied on Tuesday, reaching 105.55 at the time of writing.
Speaking to Asharq Al-Awsat, financial expert Fadl Al-Bouainain said: “As long as prices remain above 90 dollars per barrel, then they will not have an effect on the Saudi budget throughout the current year, because this budget was drawn up during times when prices were lower than the current ones.”
In the months prior to the announcement of the Saudi budget in December, crude prices dropped to the 100-dollar-per-barrel mark in August and to just under 102 dollars per barrel in November.
Bouainain added that the Kingdom’s oil revenues would likely be affected by the drop, but that losses would be heavier for producers of shale oil—which is more expensive to produce than crude—such as the United States.
He also expressed surprise at the current prices, given the current political uncertainty in many of the global oil-producing heavyweights.
“Given the limited amounts [of crude] available in some [major] oil producers such as Iraq and Libya, as well as the crisis in Ukraine and the resulting sanctions against Russia, which is one of the most important oil-producing nations, one would have expected a rise in oil prices. However, what is currently happening is a drop in prices in a manner that is surprising.”
Economic expert Khaled Yehya told Asharq Al-Awsat he expected oil prices to oscillate between 100 and 110 dollars per barrel for the rest of the year.
“These are good prices for the current Saudi budget,” he said. “They will, however, put a lot of pressure on countries who produce shale oil, such as the United States.”