Saudi Arabia Faces Oil Price Dilemma
As Saudi Arabia pushes ahead with its ambitious Vision 2030 plan to build huge futuristic cities and resorts, the world’s top crude oil exporter will need to borrow more money on the debt markets as oil prices continue to linger at levels of about $20 per barrel lower than the Saudi fiscal breakeven oil price. The Kingdom, the leader and main architect of the OPEC+ production cuts, is starting to ease a small part of these cuts on April 1, per the group’s latest plan to add 138,000 barrels per day (bpd) to supply this month. Rising OPEC+ output this year could weigh down on oil prices, which have been hovering in the low $70s per barrel in recent weeks. That’s well below the $91 per barrel that the International Monetary Fund (IMF) thinks is the oil price needed to balance Saudi Arabia’s budget. With many uncertainties about global trade and economic and oil demand growth, the Kingdom may have to endure a prolonged period of lower-than-breakeven prices and raise its public debt. Borrowing will have to increase to cover planned expenditures, or spending on some mega projects and Vision 2030 programs could be delayed or reduced, analysts say. Moreover, Saudi Arabia’s main cash cow, oil giant Aramco, has just slashed its dividend, which further dents income for the Kingdom, the company’s main shareholder. Another Deficit In its 2025 Budget Statement, Saudi Arabia expects total expenditures of $342 billion (1.285 trillion Saudi riyals) as it continues to invest in projects to diversify the economy away from oil revenues, which account for about 61% of total Saudi government revenue. Revenues are projected to be lower than expenditures, at $316 billion (1.184 trillion riyals). These estimates indicate a deficit of $27 billion (101 billion riyals), which represents about 2.3% of Gross Domestic Product (GDP). “The Government will continue funding and supporting the implementation of programs, initiatives, and economic transformation projects in line with Saudi Vision 2030, while maintaining spending efficiency and fiscal sustainability over the medium- and long-term,” the Ministry of Finance said in November. To fill in the deficit gap, Saudi Arabia will issue more debt this year, aiming “to take advantage of available market opportunities to implement alternative government fiscal operations that enhance economic growth, such as spending that is directed towards strategies, mega projects, and Saudi Vision 2030 programs.” Public debt is expected to rise to 29.9% of GDP by the end of 2025, up from 29.3% of GDP in 2024. Saudi Arabia will continue to borrow on the debt markets and explore other financing options this year as it has estimated its funding needs for 2025 are $37 billion (139 billion riyals) to cover the deficit and repay maturing debts. Lower Dividends from Aramco The funding needs are likely to be higher than these estimates from January, considering that Saudi Aramco said in early March that its dividend would be 30% lower this year. Aramco said that it expects total dividends of $85.4 billion to be declared in 2025. This is nearly 30% lower compared to last year’s $124 billion in dividends, which included about $43.1 billion in performance-linked dividends. The lower dividends for 2025 will cut revenues for the Kingdom of Saudi Arabia, which is the biggest shareholder of Aramco via a direct stake of almost 81.5% and an indirect interest via the sovereign wealth fund, the Public Investment Fund (PIF), which has 16% of Aramco. As the deficit widens with the slashed Aramco dividend, Saudi authorities have the flexibility to recalibrate investments, Fitch Ratings said last month. Fitch expects the Saudi government to cut capex and associated current spending this year. “Regular project recalibration has recently resulted in a scaling back and resequencing of certain projects, for example,” the credit rating agency noted. “This flexibility could ease the effect on Saudi Arabia’s public finances if oil prices are lower than we expect, though in Fitch’s view, lower investment spending could also have an impact on efforts to diversify the economy away from oil.” Ironically, the Saudi efforts to diversify the oil-reliant economy need a sustained period of healthy oil demand and relatively high oil prices. This year, the uncertainties about oil markets and oil prices are even higher than usual, with a new U.S. Administration seeking American dominance with tariffs on the biggest trade partners and upending foreign diplomacy. Tariffs could weigh on economies, including the U.S. and Chinese economies. If these slow down, demand for oil will slow, too, and oil prices will decline. So will Saudi Arabia’s oil revenues. The OPEC+ group’s production increase and expectations of weaker demand growth due to the U.S. tariff policies and the potential economic slowdown will cap oil price rises this year, the monthly Reuters poll showed on Monday. At around $70 oil, the short-term remedies for Saudi Arabia are to raise borrowing to finance the mega projects or delay some of these investments.
Sanctioned Russian Arctic LNG Plant Flares Gas After Long Lull
Russia’s Arctic liquefied natural gas plant appears to have flared fuel last week, satellite images show, a move that could indicate the restart of a sanctioned export facility that has effectively been shuttered since last October. Snapshots taken by the European Sentinel 2 satellite show the Arctic LNG 2 facility flaring gas on March 30. An earlier picture captured on March 22 did not show a flame or any indication of activity.
Trump’s Russian oil threat pushes India to seek alternatives
Indian refiners have rushed back to the market to seek crude supply after President Donald Trump’s threat of more penalties against Russia raised concerns over potential disruptions to oil flows. State-owned Bharat Petroleum Corp. and Hindustan Petroleum Corp. are seeking additional supplies for May arrival from regions such as the Middle East, North Sea and Mediterranean, said people familiar with the matter. The trading cycle for barrels delivered next month is typically concluded in early March. On Sunday, Trump raised the prospect of so-called secondary tariffs on buyers of Russian oil if President Vladimir Putin refused a ceasefire with Ukraine. The comments drove benchmark futures higher, with West Texas Intermediate surging 3.1% on Monday, the biggest gain in almost 11 weeks. The Indian refiners are seeking non-Russian supplies from the spot market to reduce their reliance on the OPEC+ member following Trump’s threat, said traders who received the tender notifications, asking not to be identified because they are not authorized to speak publicly.
MoPNG sets April gas price at $7.26/mmBtu; deepwater cap till Sept $10.04
The ministry of petroleum and natural gas has notified the price of domestic natural gas for the period from April 1 to April 30, 2025, as $7.26 per million British thermal units (mmBtu) on a Gross Calorific Value (GCV) basis. The Petroleum Planning & Analysis Cell (PPAC), in a notification dated March 31, 2025, said, “In accordance with MoPNG’s Notification No.L-12015/1/2022-GP-I dated 7 April 2023, the price of domestic natural gas for the period 1st April 2025 to 30th April 2025 is notified as US$ 7.26 /MMBTU on Gross Calorific Value (GCV) basis.” It further stated that for gas produced by Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) from their nomination fields, the price shall be subject to a ceiling of $6.75/mmBtu on GCV basis for the same period, in accordance with Para 4 of the notification dated 7 April 2023. In a separate notification issued on the same date, the ministry also announced the ceiling price for gas produced from difficult fields such as deepwater, ultra deepwater, and high-pressure-high-temperature (HPHT) areas. The price ceiling for such gas has been set at $10.04/mmBtu for the period from April 1 to September 30, 2025.