An expected? Saudi Arabia Would Need Oil At $80-$85 A Barrel To Balance Budget

Top oil exporter Saudi Arabia would need oil priced at $80-$85 a barrel to balance its budget this year, an International Monetary Fund official said.Riyadh’s breakeven oil price depends on several factors, including the level of oil production, how much of Saudi oil revenues are transferred to the budget, and how non-oil revenues perform this year. “But if you take the (2019) budget as presented with everything remaining equal, a breakeven point would be around $80-$85 dollars,” Jihad Azour, director of the IMF’s Middle East and Central Asia department, told Reuters. Crude oil prices have dropped more than 30 percent from a peak above $86 dollars a barrel hit in October. Benchmark Brent crude was trading at around $62 a barrel on Monday Such price volatility has had an impact on the public finances and economic growth of all oil-exporting countries. “It will not affect their ability to finance themselves, because when you look at Saudi, its (bond) spreads are very tight, but it has an effect on fiscal accounts,” Azour said.

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They are preparing the public ... on their side is all the drama in Venezuela and Iran, so they choose the perfect time to hit ...

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The rest of the world needs oil under of  $40 a barrel to live a good life :)

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6 minutes ago, pinto said:

They are preparing the public ... on their side is all the drama in Venezuela and Iran, so they choose the perfect time to hit ...

Or they can take their “corrupt” billionaires to a hotel and shake them down for another $100 Billion....

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I'm wondering if that "break even" includes all the plans incorporated in their 2030 Vision Plan? If it does I can see where they can very easily scale back projects and operate pretty well with prices in the $62-$65 dollar range.

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Pumping four million barrels of oil a day, the Permian basin is now producing more oil than every OPEC member except Saudi Arabia and Iraq... So,  MbS stop with your greed boy.

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Greed and sin... isn’t it something that world is respecting today? I'm wondering what will be if, after Saud Arabia, any of "big" OPEC countries want to fill their budget... ( $100, $120.... per barrel) Ridiculous!

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6 minutes ago, 50 shades of black said:

Pumping four million barrels of oil a day, the Permian basin is now producing more oil than every OPEC member except Saudi Arabia and Iraq... So,  MbS stop with your greed boy.

I agree. The only real answer: 

https://www.nytimes.com/2019/02/03/business/energy-environment/texas-permian-field-oil.html

 

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8 hours ago, Justin Hicks said:

I'm wondering if that "break even" includes all the plans incorporated in their 2030 Vision Plan? If it does I can see where they can very easily scale back projects and operate pretty well with prices in the $62-$65 dollar range.

I have issue with so much of Vision 2030, but the premise is good. With their population boom, high 25 and under unemployment, and they can't just invent another 6 million government jobs, they need a private sector, but they want to engineer it as if it was a government ministry, which won't work, especially in an environment where you can't be critical of the leader without fearing for your livelihood, or worse.  How they are "priming the pump" has massive issues IMHO, but cutting back and hoping won't help much. 

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23 hours ago, damirUSBiH said:

The rest of the world needs oil under of  $40 a barrel to live a good life :)

Unfortunately the world cant have oil at $40.  Oil shale in its most suitable basin can not be produced at a profit under $50.  It is only producing 5 million barrels of the required 100 million per day.  Large volumes are produced from offshore which needs around $60 to breakeven. 

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IMHO:  This break even number fluctuates wildly WITH price.  at 40 people say 50, at 50 people say 60.  I'm  not joking here..  IN JULY '18 the numbers were completely different because there was a shortage mode and PANIC was easy to create and  sustain.   

I'm confident in saying Saudi Arabia is VERY CHEAP..  Maybe $15.  because they have the production pipeline and FACTORY  side, huge untapped resources that never had to resort to fracking -- or other wild stuff USA drillers have.  I further completely disagree with nonsense that Sudi are in deficit spending .. THEY ARE BUILDING a gigantic FIRST CLASS EMPIRE City and funding a NOT  OIL  economy  -- with basically unlimited funds so it cost 2x a budgeted place would.  

So what are the numbers??   And lets make them comparable to AFRICA whre things are done on the cheap without the favc to hate MUlti-millions CEO salary ( stock bonus really )  

 

Thanks .. I'm sure this is valuable  to MANY.  

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Can somebody tell  us how much  USA  oil is subsidised ??   We all know it's happening.. But how much.. I have at times heard crazy big numbers of  up to $12 / barrell.     What is subsidised ?? 

This is a dangerous number to publish for fear of backlash.  If someone isn't  comfortable, can someone share it private.  I personally think is should be obscured from everyone as I see the insane of socialism and politics in the online media every day so have no interest in screwing up USA oil producers.  

I am not in the industry - But could figure out OIL Sciences in a year if in the environment ...as I am a terribly smart Old school engineer from tech world.. who built the HARDWARE THAT MAKE THE INTERNET and your computer GO..   I love figuring everything out.  

I'm retired to trader .
I traded  1998 oil  26->13->25 while still working .   2014 $100++ -> 60  2016 WTI oil to $26 and back out.  Xmas eve 2018 to $43  

THANK YOU MUCH.  

PS:  I'm saying this everywhere as People don't seem to get it.  Please do share this  👍
In the USA, if a youth  doesn't want to be dangerously  poor, statistics show that there is less than a 2% chance of getting there if you follow some simple rules 
1)   graduate high school 
2)   get a job and keep it for a year
3)   don't have a baby before marriage. 
-- I can't document this one  NO CRIME  and  Avoid significant use of drugs and Alcohol 

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On 2/11/2019 at 11:38 AM, rainman said:

Top oil exporter Saudi Arabia would need oil priced at $80-$85 a barrel to balance its budget this year, an International Monetary Fund official said.Riyadh’s breakeven oil price depends on several factors, including the level of oil production, how much of Saudi oil revenues are transferred to the budget, and how non-oil revenues perform this year. “But if you take the (2019) budget as presented with everything remaining equal, a breakeven point would be around $80-$85 dollars,” Jihad Azour, director of the IMF’s Middle East and Central Asia department, told Reuters. Crude oil prices have dropped more than 30 percent from a peak above $86 dollars a barrel hit in October. Benchmark Brent crude was trading at around $62 a barrel on Monday Such price volatility has had an impact on the public finances and economic growth of all oil-exporting countries. “It will not affect their ability to finance themselves, because when you look at Saudi, its (bond) spreads are very tight, but it has an effect on fiscal accounts,” Azour said.

Brent and WTI seem to rise and fall together....

Is it somehow possible that the "spread" between WTI and Brent could "widen" to the extent that WTI stays low for the USA,  but somehow allow Brent to go higher ?       could there be a "decoupling" between WTI and Brent........

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On 2/11/2019 at 8:15 PM, John Foote said:

I have issue with so much of Vision 2030, but the premise is good. With their population boom, high 25 and under unemployment, and they can't just invent another 6 million government jobs, they need a private sector, but they want to engineer it as if it was a government ministry, which won't work, especially in an environment where you can't be critical of the leader without fearing for your livelihood, or worse.  How they are "priming the pump" has massive issues IMHO, but cutting back and hoping won't help much. 

the whole SAUDI political situation at the moment reminds me of the last years of the Shah's government in Iran..........

the Shah was under a lot of political pressure because of his Savak,  while,  at the same time,  he was spending GOBS of money trying to improve the Iranian Standard of Living ,  and trying to "diversify" the Iranian economy,  while setting up government support programs like the "Iranian Retirement System" that Ross Perot's company had the contract for........

hopefully,  the Saudi's will succeed in diversifying their economy........  without getting overthrown........

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On 2/24/2019 at 2:38 AM, mad-trader said:

Can somebody tell  us how much  USA  oil is subsidised ??   We all know it's happening.. But how much.. I have at times heard crazy big numbers of  up to $12 / barrell.     What is subsidised ?? 

This is a dangerous number to publish for fear of backlash.  If someone isn't  comfortable, can someone share it private.  I personally think is should be obscured from everyone as I see the insane of socialism and politics in the online media every day so have no interest in screwing up USA oil producers.  

I am not in the industry - But could figure out OIL Sciences in a year if in the environment ...as I am a terribly smart Old school engineer from tech world.. who built the HARDWARE THAT MAKE THE INTERNET and your computer GO..   I love figuring everything out.  

I'm retired to trader .
I traded  1998 oil  26->13->25 while still working .   2014 $100++ -> 60  2016 WTI oil to $26 and back out.  Xmas eve 2018 to $43  

THANK YOU MUCH.  

PS:  I'm saying this everywhere as People don't seem to get it.  Please do share this  👍
In the USA, if a youth  doesn't want to be dangerously  poor, statistics show that there is less than a 2% chance of getting there if you follow some simple rules 
1)   graduate high school 
2)   get a job and keep it for a year
3)   don't have a baby before marriage. 
-- I can't document this one  NO CRIME  and  Avoid significant use of drugs and Alcohol 

mad-trader,

I am pleased I am not the only one who thinks that shale is a state backed geo political strategic play ( I think the same of Tesla ). I get the feeling that the banks lending to shale know they are backed by govt. Any losses will be underwritten by govt. and profits will be kept by the financiers. The US becoming the worlds largest producer of oil is far more important than the profit or losses involved in it doing so ! So in answer to your question of how much is it subsidised the answer is by whatever it takes !

With all your experience can I ask where you see Brent going this year ? 

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53 minutes ago, Auson said:

mad-trader,

I am pleased I am not the only one who thinks that shale is a state backed geo political strategic play ( I think the same of Tesla ). I get the feeling that the banks lending to shale know they are backed by govt. Any losses will be underwritten by govt. and profits will be kept by the financiers. The US becoming the worlds largest producer of oil is far more important than the profit or losses involved in it doing so ! So in answer to your question of how much is it subsidised the answer is by whatever it takes !

With all your experience can I ask where you see Brent going this year ? 

^This

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(edited)

5 hours ago, Auson said:

mad-trader,

I am pleased I am not the only one who thinks that shale is a state backed geo political strategic play ( I think the same of Tesla ). I get the feeling that the banks lending to shale know they are backed by govt. Any losses will be underwritten by govt. and profits will be kept by the financiers. The US becoming the worlds largest producer of oil is far more important than the profit or losses involved in it doing so ! So in answer to your question of how much is it subsidised the answer is by whatever it takes !

With all your experience can I ask where you see Brent going this year ? 

America first!

Edited by BigJets
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$80-85 will slow economic growth and is not sustainable. I the ideal price of oil to sustain demand and supply would be $50-65/Barrel. Anything more than 65 is not good for the economy. 

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(edited)

Saudi's need $80.00 bbl.  Good luck.  They might be able to get it this year but once the pipelines from Permian get completed and export terminal upgrades @ St. James, Houston, Port Author and New export terminals Off-Shore and Corpus Christi get completed (Q4 '19 thru Q1 '20)  the Oil Tsunami will hit the world market .  New technology and methods for BOTH deep water and shale have greatly reduced the cost per barrel.  The latest methods (Cube or Row horizontal drilling) cost money upfront average $160 Million per pad but are producing oil at B/E in the high teens low 20's in shale plays.  Shale is now recovering approx. 15% of oil from given acreage (up from 3% to 5% in 2013)  and will go to low 30% in 3 to 4 years.  

With $20 B/E shale and sub $30 now in Deepwater, OPEC (aka Saudi Arabia) and Big Oil won't be able to continue their "stabilize" and "balance" con game.  Not good for National oil companies and small to midsize US shale companies.  The bigger Shale Co's and Big Oil (Chevron, Exxon, Conoco, Etc ) will thrive.  Example:  Hess Energy 2018 wells getting 55% return at $50 a barrel.  Pre 2018 only 12% at $50.

If you think the Mideast is unstable now  . . . .  wait till oil prices "stabilize" and "balance the market at $45 to $55 bbl.  PS Saudi break even is $4.00 bbl. Nice return for Sandi's but nowhere near $80 needed to balance budget.

Edited by JJCar
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(edited)

About 500 operators in the U.S. shale plays.  Look for major consolidation small to midsize shale operators will merge with large players or be foreclosed by banks and sold to large players.  

Lot of oil coming online and not just Shale.  Think Guyana, Brazil, West Africa, South Sudan, South Africa. OPEC is in denial.  They talk a big game but after this year it is curtains.  Also Bahrain just discovered 80 billion bbls shale recoverable oil,  Libya and Eastern Algeria have  126 billion bbls SHALE OIL.  

In my opinion the ultimate winners will be the BIG oil Co's in US shale and Deepwater.  wait till next drop in oil prices to buy in.

Edited by JJCar
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(edited)

The banks lent to Shale Operators starting when oil was $100/bbl and quantitative easing brought  the cost to borrow to nothing.  That changed.  Big Oil will prevail.  OPEC has been extorting countries for 50+ years.  They stopped shipments in the 1070s because we supported Israel against Egypt and Syria. And again to raise prices several times in the 70's and 80's. Then recently 2015 with the expressed intent to kill US shale.  I remember Saudi oil minister state in 2013," we need $100 oil to support our social programs. That's a fair price." They are not our friend ,  they are opportunists. 

There is major descent within Saudi Arabia . . . .  the cash cow feeding the descent is about to die in my opinion. With 60% of population under 30years old and very high unemployment I ask what happens when oil settles btw $45 to $55 dollars.  

Edited by JJCar
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(edited)

The high Break evens published for US shale plays are 2016 numbers.  Read Hess 10K 55% return at $50.00 oil.  Its only getting better.

Listen to Shell Oil . . . .  Deepwater now and going forward under $30.00 bbl oil.

Also watch out for demand decline.  Smart money sees Electric Vehicles taking off FASTER than any prognosticators can imagine.  Its just starting.  The automobile industry is no longer an Industrial company,  they are becoming Tech companies.  Do your research on Rivian.  A whole new auto design from bottom up.  You wont recognize the Auto Industry 5 to 10 years from now. 

In US oil consumption 1/3 gasoline, 1/3 diesel,  1/3 other (Marine, Air, Petrochemical).  Think about it in todays world as little as 1 million extra barrels a day can trash oil prices.  Yes there is some new demand in Air Transport, Emerging Markets, maybe pertochem  . . .  but nowhere near enough to make up for increase supply and electric vehicle growth. 

Edited by JJCar
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5 hours ago, JJCar said:

The high Break evens published for US shale plays is 2016 numbers.  Read Hess 10K 55% return at $50.00 oil.  Its only getting better.

Listen to Shell Oil . . . .  Deepwater now and going forward under $30.00 bbl oil.

Thanks for the huge brain dump,JJCar.  I will look much closer  to future oil prices based on your info..Much lower than I expected..  .. IMHO $40 WTI  is a floor price  -- there was far too much pain  and nobody wants to go back.  I agree with smaller countries and  China is far more motivated to search..  Then I found that the 2 larges OIL co revenues  in China was $1T USD nearly in 2014.    I live the 1972 oil crisis - but was too small to know why.  The cars were lined up well over 50 deep..   Hostage or not US has grabbed a lot of cheap oil over the years.   I found some data .. Actual price and Inflation adjusted. and I had no clue prices were so high at 1979 + 50%  and 1980 another 50%  We came off the gold standard 

1971 $3.60 $21.77
1972 $3.60 $21.08
1973 $4.75 $25.97
1974 $9.35 $46.35
1975 $12.21 $55.51
1976 $13.10 $56.36
1977 $14.40 $58.13
1978 $14.95 $56.14
1979 $25.10 $83.86
1980 $37.42 $111.30
1981 $35.75 $96.38

 

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7 hours ago, JJCar said:

Also watch out for demand decline.  Smart money sees Electric Vehicles taking off FASTER than any prognosticators can imagine.  Its just starting.  The automobile industry is no longer an Industrial company,  they are becoming Tech companies.  Do your research on Rivian.  A whole new auto design from bottom up.  You wont recognize the Auto Industry 5 to 10 years from now. 

 

What are the reasons which can drive demand to decline and when it might happen? Amount of ICE cars growing (I could not find info now, however as far as I remember cars consume something about 35% of  total oil consumption)....Especially in developing countries. World will need more oil. Global demand going up, with some insignificant fluctuations of growth pace

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