Introduction of Iran’s Oil to Market Unlikely to Decrease Saudi Production

But Saudi Arabia is paying the price for its high-production stance and sees a $98 billion budget deficit for 2015 and another $86.86 billion hole in 2016.

Most of this was, however, shipped overseas by their JV partners, leaving the country a net importer, with an average of 744,784 mt of gasoline imported each month this year, according to Joint Oil Data Initiative data.

As a results, cuts are coming: The budget calls for a 14% reduction to 840 billion riyals ($224 billion U.S.), down from 975 billion ($260 billion U.S.). Construction firms are also expected to be hurt by spending cuts in the budget.

Saudi petrochemical stocks have already at least partially factored in the rise in gas feedstock prices, and the new prices – methane was raised to $1.25 per million British thermal unit and ethane to $1.75, from 75 US cents for both – was not as high as the $2 which some analysts had predicted.

Jadwa estimated the oil price used to calculate oil income in 2016 at $40.3 a barrel, down from $64.8 a barrel this year.

Saudi Arabia’s oil minister said on Wednesday his country won’t change policy and will continue with the current output level that has kept prices at historic lows.

The ministry said it would review government projects to make them more efficient and ensure they were necessary and affordable.

Saudi Arabia’s planned cuts in spending and energy subsidies signal that the world’s largest crude exporter is bracing for a prolonged period of low oil prices. The International Monetary Fund had projected a deficit of $130bn.

The budget for the next fiscal year is adopted in the light of very low oil prices, the ministry said, adding that, “this budget also comes amid challenging worldwide and regional economic and financial conditions, namely a global economic slowdown in growth”.

We also learned on Monday that the monarchy may be looking to roll back the generous subsidies that weigh on the kingdom’s budget.

The kingdom withdrew more than $80 billion this year from the reserves, which stood at $732 billion at the end of 2014, and issued bonds worth around $20 billion.

Falling oil revenues arising from the long-lasting strategy by the Opec oil producer cartel to suppress oil prices have led to the state deficit swelling to 367 billion riyals ($97.9bn) in 2015, around 15% of GDP.