Saudi assets gain over SR35bn in July

Strong oil prices allied with an increase in crude production to boost Saudi Arabia’s foreign assets by more than SR35 billion in July and push them to their highest ever level, official data showed on Saturday.

Analysts said the increase in July and in previous months during 2011 indicates the world’s dominant oil power is earning more than spending  and this could turn a budgeted fiscal deficit into a surplus if crude prices remain firm.From about SR1,897bn ($505.8bn) at the end of June, total foreign assets controlled by the Saudi Arabian Monetary Agency (Sama), the Gulf kingdom’s central bank, soared to a record high of SR1,932.4bn at the end of July, Sama said in its monthly bulletin for May.

The increase meant that Saudi Arabia’s foreign assets swelled by a whopping SR227bn in the first seven months of 2011, the biggest increase in such a period of time, according to financial analysts in the country.The surge was a result of a sharp rise in oil prices, which averaged about $108 in July, nearly $50 above Saudi Arabia’s budget forecasts.

The country’s oil production has also surpassed nine million bpd compared to 8.3 million bpd through 2010 as the Kingdom sought to offset disruption of supply from Libya.

A breakdown showed Sama’s deposits with banks abroad edged up from around SR372.5bn at the end of June to SR375.1bn at the end of July. Investment in foreign securities swelled from SR1,321.3bn to SR1,346bn.

Foreign currencies and gold gained around SR3bn to reach SR159.6bn at the end of July compared withy SR156.5bn at the end of June.
“Miscellaneous assets” grew to SR26.7bn from SR23.3bn. Saudi Arabia’s foreign assets have steadily grown in most of the past 10 years as a result of higher oil prices, gaining nearly SR135bn through 2010.They recorded one of their largest increases of nearly SR513bn during 2008, when oil prices climbed to their highest annual average of nearly $95 a barrel. But a sharp fall in crude prices depressed them by SR139bn in 2009 to widen the actual budget shortfall to nearly SR87bn following a record high surplus of nearly SR580bn in the previous year.In 2010, the budget reverted into a surplus of SR109bn after oil prices increased by at least $15 a barrel.

For 2011, Saudi Arabia announced another record high budget of SR580bn for 2011, with a deficit of SR40bn.But analysts believe the shortfall will again revert into a surplus at the end of the year on the grounds the oil price assumed by Riyadh of just under $60bn be far below the expected actual price. In the first seven months of 2011, crude prices averaged as high as $100 a barrel and could be far higher through the year because of  political unrest in the Middle East and North Africa, where oil supplies by Opec member Libya have been totally disrupted because of the current conflict. According to National Commercial Bank (NCB), Saudi Arabia’s largest bank, the 2011 deficit could turn into an actual surplus of around SR77bn.

“We believe that revenues are underestimated, and the government will still manage to record a surplus in 2011. With our forecast of $80 for the average Arabian light spot prices and an 8.5 million bpd for average oil production in 2011, we project revenues and expenditures at SR753bn and SR677bn, respectively. This would lead in turn to a budget surplus of SR77bn, or 4.2 per cent of estimated GDP in 2011,” NCB said.

It expected actual expenditure to be overshot by around 17 per cent through the year as the government is pursuing post-crisis fiscal expansionary measures, which are aimed at supporting the economy. But in another study, Banque Saudi Fransi said it expected overspending to be far high, putting it at about 45 per cent, following the announcement of a massive financial handout for citizens by King Abdullah over the past few weeks.Forecasts by the Riyadh-based Jadwa Investments showed the actual fiscal surplus could be as high as SR1127 billion this year.

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