Saudi oil production expected to fall later this year
The Saudi Arabian economy will continue to be buoyant in 2012 and beyond, the MEED Saudi Arabian Energy EPC Projects conference was told on 23 April.
Jadwa Investment head of research Paul Gamble said that oil prices and demand for Saudi Arabian oil will remain high in the year and that these factors will continue to lift the kingdom’s economy.
“Oil prices have gone up robustly this year,” Gamble said. “This is mainly due to worries about Iran and world demand. We feel that tensions around Iran will fall. Slower economic growth means slower growth in oil demand. There will be increasing oil production. Libya’s producing about 80 per cent of its pre-crisis output and Iraq’s output hit a 30-year high. But, nevertheless, we think that Brent will end the year around $100 a barrel.”
Gamble said he expects oil prices to remain buoyant for the foreseeable futre. “Our longer-term forecast is about $90-100 a barrel. There is still not that much spare capacity in the world. These factors will support oil prices at about $100 a barrel.
“Our view is that Saudi production will fall in the second half of the year, but will average 9.6 million barrels day (b/d) in 2012,” Gamble said.
“High oil prices and high oil production mean higher government revenue, which will be at a record level this year,” Gamble said. “That means the government can afford a higher level of underlying government spending in 2012.” He said his forecast for government spending excludes special factors, such as the one-off pay-hike for government employees applied in 2011.
“The Saudi Arabian government has no debt problems at all,” Gamble said. “It has been cutting debt. The austerity that is being applied elsewhere in the world, therefore, does not apply here.”
Gamble said that consumer spending will continue to grow, construction will be the most buoyant sector of the Saudi economy and that interest rates will remain low. He added that Saudi Arabia’s GDP will grow by about 5 per cent in real terms in 2012.