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Fueling the economy
An increase in oil prices combined with rising production will see Saudi’s economy bounce back, say analysts.
February 28, 2010 3:12 by Aarti Nagraj
However, with countries slowly moving towards economic recovery, demand for oil has increased, and prices have increased from $32.4 per barrel in December 2008 to around $80 per barrel at the moment.
Saudi increased output by 100,000 barrels in February to produce 8.25 million barrels a day, the highest level since December 2008, Bloomberg’s survey said, adding that the Kingdom exceeded its quota by 199,000 barrels a day. The country has about 264 billion barrels of crude oil reserves and has an output capacity of around 12 million barrels per day.
The rise in oil prices has brought in more revenue for the government, and hence it has been in a position to offer several stimulus measures to the market to support recovery, NCB said in its report.
Last week, a report by Saudi firm Jadwa Investments predicted that rising oil prices and increased production could boost the Kingdom’s hydrocarbon export earnings to reach $186.3 billion in 2010, as compared to the $157.4 billion it made in 2009.The increase in export revenue will also boost Saudi’s total revenue to around $164.7 billion this year, compared to $134.6 billion in 2009, it said.
“The Saudi economy is expected to improve in 2010. Growth will pick up, credit will become more readily available and the government budget will return to surplus. High government spending will be the main engine of growth, with the private sector making a greater contribution as credit conditions improve. A reviving global economy should keep oil prices around their current levels and increase demand for the exports,” the report said.
“Higher average oil prices and production should generate sufficient additional revenue to ensure a budget surplus,” it added.
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