Saudi Arabia

DRIVER: Saudi Arabia could see some tumultuous economic policy changes provoked by the lower oil price era and the emerging challenge from renewable energies. It also faces threats from Middle East turmoil.

• [New] China 's proposed economic and security partnership with Iran would destabilize the Middle East and put Washington's close partners in the region, Saudi Arabia, the United Arab Emirates and Israel, at risk.
• Saudi Arabia plans to build two large nuclear power reactors as part of the kingdom's projected 17 GW of nuclear capacity by 2040, potentially providing 15 pc of its power.
• To wean Saudi Arabia away from its dependence on oil, the crown prince has loosened restrictions on religious visas in the hope of increasing the number of religious tourists to 25 million per year by 2025.
• Saudi Arabia does not have any commercial nuclear plants, but has expressed ambitions to build around 17 GW of nuclear energy after 2040.
• Saudi Arabia has already taken some austerity steps in an attempt to rein in public spending and mitigate the impact of the oil crisis on its economy, but it seems more will be needed.
• Saudi Arabia and other top producers from the Middle East are coming under heavy pressure to cut the price of their crude, while Royal Dutch Shell predicted demand may not see a full recovery until next year.
• Britain will resume its arms sales to Saudi Arabia despite fears that UK-made weapons could be used by Riyadh against civilians in Yemen.
• The price of Brent crude has varied significantly over the past 12 months due to an attack on key crude oil infrastructure in Saudi Arabia which cut global supply by 5%; the prediction for 2020-2021 is a relatively stable oil price of $ 60-65 / barrel.
• The International Monetary Fund (IMF) has lowered Saudi Arabia's economic growth forecast to 1.9 per cent this year due to oil output cuts agreed with the Organisation of Petroleum Exporting Countries (OPEC), having previously projected a 2.2 per cent GDP growth.
• Jet fuel demand in Saudi Arabia will likely decline by around 40% in 2020 compared with 2019, accounting for about 20% of the jet fuel demand in the Middle East.
• The economy of Saudi Arabia will shrink by 2.3% and the United Arab Emirates (UAE) by 3.5% in 2020, Qatar will record a contraction of 4.3%, Kuwait by 1.1%, Oman by 2.8% and Algeria by 5.2% all in 2020.
• Saudi Arabia expects to increase international and domestic visits beyond 100 million a year by 2030, attracting significant foreign and domestic investment and creating a million jobs and contributing up to 10% towards KSA's GDP.
• As the clear winner of the OPEC + agreement, Saudi Arabia is expected to add 25 billion barrels to future production potential despite peak oil coming sooner.
• Neom, Saudi Arabia is expected to be 33 times the size of New York City and has been described as the world's largest and most ambitious infrastructure project - spanning 10,230 square miles and requiring at least US $ 500 billion in investment.
• Even if the OPEC + countries implement their output deal as planned and in full, including the additional reductions offered by Saudi Arabia and its closest allies for June, the world's stockpiles of oil will be much higher at the end of the year than they were at the beginning.
• Kuwait, Saudi Arabia to resume joint oil production - Al-Khafji Joint Operations and Wafra Joint Operations will resume crude oil production in the Saudi-Kuwaiti divided zone in 2020, starting gradually but targeting year-end production of 325,000 b/d.
• Smaller oil revenues mean the world's top oil exporter, Saudi Arabia, pwill have to draw down $32 billion from foreign reserves this year and borrow billions more from debt markets.
• Russian President Vladimir Putin will refuse to submit to what the Kremlin sees as oil blackmail from Saudi Arabia, signaling the price war that's roiling global energy markets will continue.
• In places such as Algeria and Saudi Arabia, precipitation by 2050 is forecast to decline by 4.9 percent and 10.5 percent, respectively, while in Iran and Iraq, precipitation is forecast to decline by 15.6 percent and 13.3 percent, respectively.
• On the supply side, the IEA noted the production cuts by the alliance of exporters led by Saudi Arabia and Russia, but added that by the end of 2020, U.S. production could be down 2.8 million barrels a day, three times the projected drop in Saudi Arabia's output.
• Saudi Arabia, the world's top oil exporter, is issuing $2.5 billion worth of Islamic bonds, or Sukuk, on Tuesday, returning to the bond market to take advantage of the low borrowing costs in hopes of replenishing its government coffers as persistently low oil prices depress revenues.
• Saudi Arabia's government will raise the debt ceiling from 30% to 50% of GDP with a higher borrowing requirement due to COVID-19 and the fall in oil price.
• Countries with low oil production costs such as Saudi Arabia have high government spending bills and will likely run a deficit of $150 billion this year, drawing heavily from sovereign savings.

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Last updated: 13 September 2020