Saudis predict $29 oil price in 2016

The budget is the first under King Salman, who took over at the helm of the monarchy in January.

Its 2016 budget plan aims to cut the deficit to 326 billion riyals, reducing pressure on Riyadh to pay its bills by liquidating assets held overseas. Income for 2015 was 15 percent lower than projections and 42 percent less than in 2014.

OPEC refused to put a lid on production and the oil price has continued to slide since, now hovering around $37 a barrel.

Earlier this year, the International Monetary Fund released a report detailing the impace of low oil prices on the world’s largest crude oil producers.

Non-oil revenues rose by 29 percent this year to $43.5 billion, contributing 27 percent to public revenues.

However, those stocks surged 9.9 and 9.6 percent respectively on Monday in anticipation of the budget, so they may not rise further in the short term.

The reserves dropped from United States dollars 732 billion at the end of 2014 to USD 628 billion in November, Jadwa said.

The finance ministry also said it will adjust subsidies for water, electricity, and petroleum products over the next five years.

Gas prices have been increased to $1.25/MMBtu from $0.75/MMBtu, and ethane, the main feedstock for petrochemicals, to $1.57/MMBtu, up more than 100% from the long-standing fixed price of $0.75/MMBtu, the official Saudi Press Agency said late Monday.

Such subsidies are a highly sensitive issue in Saudi Arabia, where residents have grown accustomed to low utility and fuel costs.

Under the new price regime, higher-grade unleaded petrol rises to 0.90 riyals ($0.24) per litre from 0.60 riyals, a hike of 50 percent.

The Saudi-led policy is meant to cause a period of low prices that drives out producers thought to need high prices, such as the U.S. Eventually, analysts have said, supplies should recede, increasing OPEC’s share of the market and eventually causing prices to rebound.

Next year’s budget projects spending of SR840 billion, down from SR975 billion actually spent this year. With a proxy war against Iran playing out in neighbouring Yemen, and the ISIS insurgency on its doorstep, you might have thought that Saudi remits for the global defence industry were secure – but you need deep pockets to throw your weight around.