Talk about getting comfortable with the multi-year commodities super-spike we’ve had…
Saudi Arabia’s National Commercial Bank has disclosed that its government requires $60 just to break even on its budget these days.
Yet they’re actually aiming for $75 oil in 2010, which will provide them with a healthy $24.3 billion budget surplus.
The kingdom may end up spending 12% above the 540 billion riyals it budgeted for this year and get revenues 48% above the planned 385 billion riyals, Reuters quoted Said al-Shaikh, chief economist at National Commercial Bank (NCB), as saying.
“Crude oil prices, based on a modest recovery in global demand, are expected to average $75 (per barrel) with Saudi production rising to 8.3 million barrels per day,” Shaikh told a conference.
After declining by almost 8% in 2009, net foreign assets held by the Saudi central bank are set to rise by almost 10% this year to $445.2 billion, surpassing their lifetime record of 2008, Shaikh said, based on assumptions of daily production of 8.3 million bpd and a $75 average price for oil.
So they’re budgeting for $60 oil (where the budget breaks even) while wondering what to do in their likely expected scenario whereby oil remains around $75.
Which means $60 per barrel is the new cheap oil, since Saudi Arabia runs a deficit at any price lower.
Note OPEC has been pretty adamant recently about defending the $70 – 80 oil band, and at a recent oil conference even forecast that oil could remain between $70 – 80 per barrel for 10 years.
Luckily for the rest of the world, OPEC’s control over the global oil market is clearly dying. So it might not be up to them anymore, really.
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