Mr Naimi’s pledge came just days after Saudi Arabia posted its biggest ever budget deficit, of pounds 66bn, after state revenues collapsed because of the fall in the price of oil.
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Oil prices have fallen by more than half ever since that November 2014 decision, with Brent crude, the worldwide benchmark, trading at about $37 a barrel on Wednesday in London, its lowest level since the 2008-09 financial crisis.
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Saudi Arabia’s Tadawul dropped 3.23 percent following the announcement of the country’s $98B budget deficit.
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“Falling oil prices could make sure reforms both more urgent and, possibly, politically easier to implement”, the International Monetary Fund said in a report this year.
The 2016 budget statement suggests the kingdom is preparing for a multi-year period of cheap oil.
The Finance Ministry said it adopted a budget for next year that takes into account the weak crude oil market.
Revenues next year are forecast at 514 billion riyals, down from revenues of 608 billion riyals in 2015, Saudi Arabia’s currency has been pegged to the dollar since 1986 and it had afforded the country a certain amount of credibility and stability.
The Saudi Finance Ministry this week reported total revenue for fiscal year 2015 at $162 billion, an estimated 15 percent decline from budgeted revenues.
To counter the impact of sliding oil revenues, the world’s top crude exporter said it was applying unprecedented cuts to public subsidies on fuel, power and water. “We meet our customers’ demand, there is no longer a limit to production, as long as there is demand, we have the ability to meet demand”, Naimi said. With a proxy war against Iran playing out in neighbouring Yemen, and the ISIS insurgency on its doorstep, you might have thought that Saudi remits for the global defence industry were secure – but you need deep pockets to throw your weight around.
The IMF has said that if Saudi Arabia raised its fuel prices to Gulf levels, it will save around $17 billion annually. Instead, it appears willing to continue tolerating cheap crude to defend market share and wait for the market “to balance” without cutting supplies, oil sources and analysts say.
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Jadwa expects the oil sector to grow by a meagre 0.9 per cent on an average crude production of 10.2 million barrels per day.
