Saudi Arabias oil exports are now expected to be higher than the original 2014 forecast and, coupled with a sustained crude price of about $109-$110 a barrel, should result in another $300bn-plus year of government revenues.
Riyadh-based Jadwa Investment has already changed its forecast as official data released by the kingdom puts year-to-date oil production at 9.7 million barrels a day (b/d). Production in Libya has remained low while Iran has not been able to ramp up exports as much as it expected following the interim agreement to halt its nuclear ambitions.
Concerns arising from the general instability across the Middle East have resulted in oil prices remaining robust, with Brent crude hovering around an average of $110 a barrel for 2014.
This upward trend will come as a welcome bonus for Riyadh, which was expecting Brent to drop below $100 for the first time in three years as well as both Libya and Iran to make an impact on Saudi oil production.
At the start o0f 2014, the Finance Ministry said it was bracing itself for a 25 per cent drop in revenues, citing a forecast figure of $225bn. However, Jadwa Investment has changed its forecast for Saudi revenues to SR1.17 trillion ($311bn). This figure is $10bn higher than the 2013 figure of $301bn, but still short of the record $336bn of 2012.
Despite geopolitical instability in several Middle East countries affecting the oil price, global supply has remained buoyant. The current insurgency in Iraq has not made any impact yet and oil exports have risen by 4 per cent year-on-year in 2014. The problems facing Libya and Iran are not new to 2014 and higher production by Saudi Arabia among other countries has filled the gap.
Opec oil output has dropped by 6.5 per cent in the first half of 2014 when excluding Saudi Arabias production. In contrast, non-Opec supply has risen by 1.4 million b/d year-on-year with increased US production of shale oil, which has risen by 13.5 per cent in 2014.
Riyadh has said it will spend SR855bn in 2014, with the main focus on improving infrastructure such as airports and roads as well as building up industrial areas across the kingdom. Social welfare spending is also expected to continue, with a continued focus on housing and education as well as continued efforts to lower unemployment, which currently stands at 12 per cent, more than 4 per cent higher than the OECD average.
The Middle Easts largest economy recorded growth of 3.8 per cent in 2013, well above the average of 2.7 per cent that is forecast for OECD countries. Non-oil sectors enjoyed growth of 4 per cent. Private-sector growth increased by 5.5 per cent.