Saudi Arabia’s oil revenue is seen rising to 2026 before declining quicker than previously expected through to the end of the decade, according to the International Monetary Fund.  

The steeper drop off is likely to cause some concern for the kingdom as Crown Prince Mohammed bin Salman drives an ambitious economic transformation with his Vision 2030 program. Riyadh has already been forced to scale back some of its plans, partly because oil prices remain far below the level the government needs to balance its budget.

Oil revenue will rise to 783 billion riyals (US$209 billion) to make up about 26% of gross domestic product in 2026, the IMF said in a report after its annual consultations with the Saudi government. The earnings are seen dipping to 778 billion riyals in 2029, 4.1% less than earlier estimates. 

Saudi Arabia needs oil prices at US$96 a barrel to balance its budget, according to the IMF. That’s more than US$20 higher than global benchmark Brent’s current levels. Bloomberg Economics puts the breakeven at US$112, once domestic spending by the kingdom’s sovereign wealth fund is taken into account. The key question for Riyadh is how the current weakness in the oil market will impact its finances and production policy.

The IMF sees Saudi Arabia’s oil production at nine million barrels a day this year, rising to 10.2 million in 2026 and 11 million in 2029, according to its report. The agency has assumed the kingdom’s average export price at US$82.5 a barrel in 2024, dropping to US$70 by the end of the decade.   

The kingdom also depends heavily on the massive dividend that it gets from 81% ownership of the state-run Saudi Aramco. The company plans to pay out a total of about US$124 billion this year, including a special component that was introduced in 2023. Without the performance-linked portion, the fiscal deficit would Saudi of 2% would’ve nearly doubled, the IMF said. 

The special payout - estimated at more than US$40 billion in 2024 - is set to be lower next year based on Aramco’s formula to pay out a portion of cash flow. Should the company decide to maintain the distribution to ease any pressure on the Saudi budget, it would likely have to boost borrowings, if oil prices don’t increase.

The IMF didn’t break out the weight of dividends, royalties and taxes in calculating the state oil revenue and doesn’t forecast dividend levels. Its calculations also assume the government won’t sell or transfer ownership of further stakes in Aramco, which would push its revenue from the company lower. 

  - Bloomberg