Saudi Arabia wants $80/bbl Brent - Dec 18

[dan_s]

Saudi Arabia optimistically estimates 2019 at $80/bbl and 10.2 MMbopd
By Mohammed Aly Sergie on 12/18/2018
https://www.worldoil.com/news/2018/12/1 ... 102-mmbopd

DUBAI (Bloomberg) -- Saudi Arabia’s government expects to earn more from oil next year, an optimism that defies most price forecasts for crude and contrasts with the kingdom’s history of making conservative financial assumptions.

The world’s biggest crude exporter is estimating that Brent oil will average about $80/bbl in 2019 assuming its production continues at 10.2 MMbpd. Saudi Aramco won’t increase its allocations to the government, according to Ziad Daoud, Bloomberg’s chief economist in the Middle East. He estimates oil will need to trade above $95/bbl for the year for the kingdom to balance its budget.

Analysts forecast oil in 2019 will hover around $73/bbl (for Brent), according to data compiled by Bloomberg. Saudi Arabia sees its oil revenue rising to a five-year high next year, but will still post its sixth-straight budget deficit. [WTI is expected to trade at approximately a $10 discount to Brent; bring it close to my "Right Price" estimate of $65/bbl in 2019. - Dan].

* NOTE: Saudi Arabia’s 2019 production estimate is based on agreement with OPEC+ that was struck in December.

Key insights

Saudi Arabian officials must be anticipating higher crude prices, more oil revenue to government coffers, rising exports, or a combination of all three factors, to justify the increase in oil revenue, Daoud said. While crude short-selling continues, with Brent dipping below $58/bbl on Tuesday and trading at its lowest since October 2017, Saudi Arabia’s bullish call is the latest sign that the kingdom expects its efforts to corral OPEC members and its allies to cut production next year will support prices. Assuming a higher oil price than most analysts is a departure from previous budgets. Last year, Saudi Arabia based its 2018 budget on crude averaging $63/bbl -- the global benchmark Brent is on track to average $72 this year. (Qatar assumed $55/bbl in its budget forecast released last week).
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For reference: If you paid attention to my December 15th podcast (still on our home page) you know that Raymond James adjusted their Brent oil price after the OPEC+ production cut agreement came out on December 14th (see slide 9 of the podcast).
RJ's Brent Forecast:
2018
$62.00 in Q1
$66.00 in Q2
$75.00 in Q3
$85.00 in Q4 < ramp up into year-end caused primarily by IMO 2020
2019
$100.00 in Q1
$105.00 in Q2
$100.00 in Q3
$95.00 in Q4