Saudi Arabia, OPEC+ 'will go for oil production cut' in Vienna meeting: MUFG

05/12/2018 Argaam

 

Saudi Arabia and the rest of OPEC+ will conform to another round of production cuts at their meeting in Vienna tomorrow (Dec. 6) given the current oversupply in the market, MUFG noted in its December 2018 issue of the Saudi Arabia Monitor report.

 

The question however is the speed and magnitude of the expected next iteration of cuts, as well as the quota allocations by each OPEC+ member state, the report added.

 

“Heading to the next OPEC+ members meeting in Vienna on December 6, Saudi Arabia’s oil strategy decision is simple – either receive higher prices and sacrifice market share through lowering oil production, or alternatively receive significantly lower revenues by maintaining or even further raising production levels,” Ehsan Khoman, Head of MENA Research and Strategy, MUFG wrote in the report.

 

The fiscal deficit continues to narrow in Saudi Arabia, with the country recording a $1.9 billion (1 percent of GDP) deficit in Q3 2018, compared with $13 billion (-7.6 percent of GDP) in the same period last year, the report added.

 

The underlying reason for the improvement stems from the revenue side of the equation, primarily due to higher oil receipts ($59.5 billion; 57.1 percent year-on-year or YoY) as well as an increase in goods and services taxes ($8.2 billion; 163.5 percent YoY.

 

“Whilst we take considerable comfort that the current era of higher for longer oil prices is strengthening Saudi Arabia's balance sheets and sharply narrowing the fiscal deficit, the cyclical upswing from higher oil receipts will serve as a testament of the Kingdom's commitment to meaningfully alter the structure of its economy,” MUFG report added.

 

However, it noted, the concern is that the pressure to return to oil-driven spending may be difficult to resist in the face of the challenging near term economic growth outlook.

Comments {{getCommentCount()}}

Be the first to comment

loader Train
Sorry: the validity period has ended to comment on this news
Opinions expressed in the comments section do not reflect the views of Argaam. Abusive comments of any kind will be removed. Political or religious commentary will not be tolerated.