Saudi Arabia's oil revenue falls to three-year low as OPEC+ cuts bite
A low price environment and sustained production cuts have impacted Riyadh's ability to earn more oil revenue.
Saudi Arabia's oil revenue fell to a three-year low in June as the world's largest oil-exporting country sees sales of its main commodity squeezed by ongoing OPEC+ cuts.
Saudi Arabia earned 66.314 billion Saudi riyals ($17.683 billion) from the sale of its oil in world markets in June 2024, according to data from the General Authority for Statistics. The revenue earned was 12.6% lower than in May and is the lowest since August 2021, data showed.
Oil revenue remained dominant in the Saudi economy, accounting for 75.4% of overall revenue. Non-oil export revenues, meanwhile, declined 17.9% in the month of June to $4.18 billion. The non-oil sector accounted for 17.9% of revenue earned by the Saudi state in June.
James Swanston is a senior Middle East and North Africa economist for Capital Economics. Saudi Arabia's oil revenue took a hit from both "price and volume impact," he told Al-Monitor.
The decline in oil revenue comes amid a drop in Saudi Arabia's crude production, which fell to the lowest since April 2021, averaging 8.93 million barrels per day in June from 9.01 million barrels per day in May, according to OPEC data.
OPEC+ cuts
The kingdom is also navigating a low oil price environment in which prices have failed to remain elevated in spite of efforts by the Saudi-led OPEC+ group to slash production.
Benchmark Brent fell sharply at the beginning of June as OPEC+ extended its current volume of cuts until 2025, with the provision to unwind voluntary cuts from October onward.
The group's overall cuts amount to 5.8 million barrels per day with 2.2 million barrels per day of voluntary cuts.
Brent futures are down nearly 6% year-on-year with the benchmark at $78.44 per barrel at 11:00 a.m. EST.
"If OPEC+ is to be taken at its word of raising oil production from October, that will go some way to raising the kingdom's oil exports values as it unwinds its voluntary 1 million barrels per day additional oil output cut and then from Q4 2025 it will go further, with increasing output with higher quotas," Swanston said.
Balancing budgets
Oil prices are unlikely to reach the $90 range needed for most Gulf economies to balance their budgets in 2024-2025. Saudi Arabia, for instance, requires oil at $96.2 per barrel in 2024 to balance its books, according to the International Monetary Fund. The DC-based financial institution made the assessment based on an assumed production of 9.3 million barrels per day of oil this year.
Riyadh's break-even price for oil is set to decline to $84.7 per barrel in 2025 as it raises crude output following the unwinding of its ongoing cuts. The IMF anticipates higher production averaging 10.3 million barrels per day in 2025.
Oil prices are likely to slide back to $70 per barrel by the end of 2025 due to higher output, according to Capital Economics. However, higher volume is not enough to offset price changes.
"So while oil receipts may rise back on par with 2021 in the near term, it could slide back a little in 2025," Swanston said.
