2016: OIL MARKETS BALANCE
Crude oil markets are likely to balance some time next year as supplies from North America, including U.S. shale, continue to decline significantly, the chairman of Saudi Arabia's giant oil company said Monday.
"Supply has plateaued in North America and [is] declining by significant amounts. We expect that to continue and perhaps accelerate in 2016," Khalid al-Falih, chairman of Saudi Arabian Oil Co., known as Saudi Aramco, said in a news conference in Riyadh.
"We see the market balancing some time in 2016. We see demand ultimately exceeding supply...Prices in due course will respond," he said.
Saudi Arabia, the world's top oil exporter, has the capacity "to wait the market out until this balancing takes place. We have the ability to finance," he said.
Mr. Falih comments come after global oil prices last week fell to levels not seen since 2004 amid an increasing glut.
But despite the plunge in oil prices, the kingdom will continue to invest in its hydrocarbon sector.
"We will continue to invest. We will invest in gas. Invest in refining, petrochemicals" and value-added oil production, Mr. Falih said. "Projects will continue. We will double our production of gas in the next 15 years or so," he added.
Saudi Arabia on Monday unveiled plans to cut back on expenditure, and sharply raised domestic fuel prices as the world's top oil exporter attempts to cope with a new era of cheap crude prices.
After years of spending its massive oil wealth to bolster the local economy and provide subsidized energy and other utilities to its 30 million people, a sharp fall in oil prices has forced the kingdom to reassess these plans.
But the kingdom doesn't plan another hike in fuel prices soon, Mr. Falih said.
Saudi officials said the government ran a record deficit of nearly 367 billion Saudi riyals ($98 billion) this year, or 15% of GDP, as low oil prices suppressed revenues, pushing it to cut planned spending by 14% in 2016 amid expectations that income from oil sales will remain under pressure.
Mr. Falih said the government didn't base its 2016 budget on a single price for oil, but rather a set of different pricing scenarios.
"Saudi Arabia is more robust financially than any other oil-producing country and we have the flexibility to deal with different scenarios," he added.
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IMF - Output grew by 3.8 percent in 2017, underpinned by a resilient non-hydrocarbon sector, with robust implementation of GCC-funded projects as well as strong activity in the financial, hospitality, and education sectors. The banking system remains stable with large capital buffers. Growth is projected to decelerate over the medium term.
IMF - Higher oil prices and short-term portfolio inflows have provided relief from external and fiscal pressures but the recovery remains challenging. Inflation declined to its lowest level in more than two years. Real GDP expanded by 2 percent in the first quarter of 2018 compared to the first quarter of last year. However, activity in the non-oil non-agricultural sector remains weak as lower purchasing power weighs on consumer demand and as credit risk continues to limit bank lending.