Saudi Arabia is accelerating its oil production growth and raising prices for Asian buyers, despite recent declines in global benchmarks. While these moves suggest confidence in future demand, they also highlight the kingdom’s need to manage mounting fiscal pressure.
The country, along with seven other OPEC+ members, is ramping up output faster than initially planned. At the same time, Saudi Arabia is increasing crude prices for Asian markets. Analysts say this shows expectations for stronger demand, but caution that key economic challenges remain.
Saudi Arabia needs oil prices around $90 per barrel to balance its budget. Brent crude is currently trading above $63—well below that target. While Saudi oil production is among the cheapest globally, its spending needs are high, especially as it continues investing in Crown Prince Mohammed bin Salman’s economic diversification plans.
This is not the first time Saudi Arabia has faced budget pressure. During the 2014–2015 oil price crash, the kingdom introduced austerity measures to cope with falling revenues. At the time, oil prices dropped from $112 to $48 per barrel, dealing a blow to both Saudi finances and U.S. shale producers.
Since then, Saudi Arabia has worked to reduce its reliance on oil. Non-oil sectors now account for a growing share of GDP. In the first quarter of this year, these sectors grew by 4.2%, helping the overall economy expand by 2.7%.
However, growth has slowed in the second quarter. Lower oil prices have pulled down government revenues, and non-oil sectors are also feeling the impact. According to the IMF, Saudi Arabia now needs oil at $96.20 per barrel to balance its budget.
If oil prices remain weak, the country’s budget deficit could reach 5% of GDP this year, according to Gulf News. The government may need to reduce public spending, raise taxes, or further support new industries outside of oil. Still, analysts say Saudi Arabia’s financial position remains strong enough to handle a larger deficit in the short term.
The kingdom recorded a $15.6 billion deficit in the first quarter alone—more than half of its full-year projection of $27 billion. Oil revenues fell 18% year-over-year, while non-oil revenues rose only 2%, widening the gap.
Goldman Sachs economist Farouk Soussa warned that if Brent crude averages just $62 per barrel this year, the deficit could balloon to $67 billion—more than double the official forecast.
Still, oil prices have been climbing. Brent is now over $63, and futures markets suggest higher demand or tighter supply may lie ahead. OPEC+ is set to add another 411,000 barrels per day in June, after a similar increase this month.
For now, Saudi Arabia faces a tough fiscal year. But the situation may push the kingdom to double down on its long-term goal: reducing its reliance on oil and building a more balanced, resilient economy.
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