By Even as Saudi Arabia plans to increase oil production from December, its revenue from crude oil exports slumped to a three-year low in August due to low prices.
Revenue from the sale of oil and refined products dropped to $17.4 billion in August, down 6% from the previous month, according to the state statistics agency.
This is the lowest level of monthly revenue since June 2021.
The Kingdom’s economy still very much depends on its oil export revenue even as the country tries to expand its technology, tourism and manufacturing industries.
The massive investment required to fuel these ambitious plans relies heavily on oil export revenues from the sale of crude and its refined products.
Merchandise exports fall
Data showed that Saudi Arabia’s merchandise exports fell 9.8% in August compared to the corresponding period last year as a result of a slump in oil exports.
Consequently, the percentage of oil exports out of total exports dropped from 75.1% in August 2023 to 70.3% in August 2024, the statistics authority said
Lower export figures are a matter of concern for the Saudi economy as it remains vulnerable to potential price shocks in the oil market.
Lower crude prices hurt Saudi’s economy
Crude oil prices have been moving in a narrow range over the past few months with the market increasingly concerned about poor demand from China.
China is the top importer of crude oil in the world. However, its economy has been struggling to recover from a property crisis, while also poor manufacturing activities.
The increasing penetration of electric vehicles has also dragged down demand for crude oil. As the world tries to move on from fossil fuels, EVs will gain further momentum, which is expected to hit oil prices more.
Brent crude prices have hovered around $70-$75 per barrel for most of this year, far below its peak of this year of over $90 per barrel hit in April.
Saudi Arabia and most other oil-producing countries in the Middle East prefer oil prices to be over $80 per barrel, which is the breakeven price for its operations.
Declining crude oil production
Another thorn in Saudi Arabia’s side is its declining oil production over the last couple of years.
The Kingdom, which is the de-facto leader of the Organization of the Petroleum Exporting Countries and allies, has been adhering to hefty production cuts since last year.
As part of a deal with other members of OPEC+, Saudi Arabia has been voluntarily reducing oil output by 1 million barrels per day.
On top of this, there are hefty production cuts, which have been in place since late 2022 to stabilise the oil market and drive up prices.
However, OPEC+ and Saudi Arabia have recently agreed to unwind some of their voluntary production cuts from December.
The move is likely to regain lost market share for OPEC countries, especially Riyadh.
Reports have claimed that the Kingdom is planning to abandon its target of $100 per barrel oil price in favour of market share.
At the moment, OPEC+ is withholding around 6 million barrels per day of oil from the market, which is about 6% of total supply.
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