Production Cuts In Saudi Arabia ?
Posted by Big Gav in saudi arabia
There are reports from the middle east that some members of the Saudi government want to cut oil production in order to maintain reserves for the future. How much influence the government has in a country run by a fuedal monarchy is open to question of course.
Saudi Arabia's Shura council (parliament) will hold a series of meetings over the next two weeks to discuss a controversial proposal by a key member to curb oil production to save reserves for better prices, Saudi media reported. The council will listen to a report by deputy chairman of the Shura water and public utilities committee, Salim bin Rashid Al Marri, who will argue for cutting crude supplies to maintain the Kingdom's underground reserves.
"Marri will seek to persuade council members that the oil production must be linked to the country's actual development needs not the needs of foreign consumers," Alriyadh newspaper said in a report from the capital Riyadh. "He will tell the Council that keeping sufficient oil quantities underground is a good investment for the future as oil prices will then be higher…he will argue that this will be better than producing more oil and generating financial surpluses on the grounds these surpluses are causing inflation."
Saudi Arabia is the world's top oil exporter and its crude policy is normally determined by the King as the oil minister's job is mainly to implement that policy.
Saudi oil revenues have now reached US$1 billion per day.
Saudi Arabia is making $1 billion (Dh3.67bn) a day in oil revenues on the back of record global fuel prices, according to a top executive at Riyadh-based Jadwa investment company.
The soaring cost of fuel in recent months has boosted state oil giant Saudi Aramco's revenues from $895 million a day at the end of February to over $1bn currently, said Brad Bourland, Chief Economist at Jadwa.
Half of Saudi's oil income is earmarked for investment in foreign assets, he said, with the era of Middle East sovereign wealth fund presence in the West still in its infancy. "I was with Aramco colleagues on February 29 and I said you guys are lucky because it's leap-year this year so you get an extra day of oil revenues. So we did a bit of back of the envelope math and we decided it was $895m that day, and that was when oil prices were just $80 or $90 a barrel.
"Currently Saudi Arabia is making over a $1bn a day in oil revenues. So $30bn a month, of which about half is being used to support core government spending, and the other half is going to Sama which says it's growing its foreign assets by about $15bn a month," said Bourland. "This is going to continue on and on, and the sovereign wealth story will continue to roll," he added.
Saudi Arabia oil revenues are predicted to hit $16.6 trillion by 2030 with prices at $150 a barrel, according to IEA production assumptions. Oil income for the UAE is expected to reach $4.6trn over the same period and for Kuwait this figure is $4.5trn. In total, by 2030 all three countries will command $25.7trn in revenues with oil priced at $150 a barrel. Sama is Saudi Arabia's sovereign wealth fund responsible for investing government surpluses.