What Is The Oil Price Cap For Saudi Arabia 2022 Budget?

Summary

• In my opinion , the $40 per barrel oil price is a possible estimate scenario for Saudi 2022 budget even if the average price of Brent crude price for 2021.
• The 2022 budget is the 6th after the launch of the Saudi Vision 2030.
• The estimated price of a barrel of oil in the budget has not been officially announced.
• The measures must have taken into account the adoption of very conservative oil price levels to prevent the possibility of any confusion that could be caused by sharp oil price fluctuation.
• There is no doubt that oil prices levels will remain influential in the coming years but the estimate of the anuual budget will be conservative without taking risk of sharp price fluctuations that may negatively affect the efficiency and sustainability of the budget.

Strong economic indicators for Saudi Arabia in 2021 continue with non-oil export level is the highest in history but there is no doubt that oil prices levels will remain influential in the coming years.

In my opinion , the $40 per barrel oil price is a possible estimate scenario for Saudi 2022 budget even if the average price of Brent crude price for 2021 is about $70, which is higher than 2018 average, in my view, the estimate of the Saudi 2022 budget is extremely conservative around $40, especially since the average price of Brent crude for 2020 was $42.

The 2022 budget is the 6th after the launch of the Saudi Vision 2030, and even if the estimated price of a barrel of oil in the budget has not been officially announced, the measures must have taken into account the adoption of very conservative oil price levels to prevent the possibility of any confusion that could be caused by sharp oil price fluctuations.

Therefore it is not excluded that a price ceiling that does not exceed $40 (for the price of Brent crude) has been set as a basic scenario for 2022 budget, after the past years witnessed different levels of price averages: $54 in 2017, $71 in 2018, $64 in 2019, $42 in 2020 and $70 so far for 2021.

The efficiency of the Saudi financial policies will take into account all possible scenarios and take them into account, and this will be about dealing with the next year’s budget 2022, especially since the pandemic is not over yet, and things may not return to the way they were before the pandemic, and this applies when dealing with expectations oil revenues henceforth.

If we take into account Saudi Arabia expected oil production at around 10 million barrels per day (bpd) and total crude oil and refined products exports (October 2021 levels) at 8.26 million bpd, and in light of the expectations of higher global oil demand in 2022, which might exceed 100 million bpd. Thus it is expected that the hypothetical price at which oil income to be estimated will be around $65 per barrel, which represents a relatively conservative level compared to the expectations of many financial institutions that the average price of Brent crude will exceed $85 per barrel in 2022 and to reach $100 in 2023.

Yet, the estimate of the 2022 budget should remain conservative and without taking risk of sharp price fluctuations that may negatively affect the efficiency and sustainability of the budget by adopting very conservative oil price levels that will help it achieve a balance between expenditures and revenues with greater flexibility in the event that oil prices take any opposite directions, thus reducing the effects of this on spending and economic growth. Benefiting from the experiences of the recent and distant past caused by sudden oil price fluctuations.