Saudi Arabia's income in 2010 will surge amid oil price resurgence. Oil rose for a second day on Thursday, following two upbeat economic reports and signs that petroleum supplies were shrinking. The US Labor Department said initial jobless claims fell last week to the lowest level since early May. The news came as hundreds of thousands of Americans lose unemployment benefits because Congress has yet to pass an extension of benefits. In addition, the International Monetary Fund raised its 2010 world growth forecast to 4.6 percent from 4.2 percent, although it said Europe needs to act quickly to resolve its debt crisis and bolster consumer confidence or the economic recovery may stall. The IMF boosted its growth estimate for the US economy to 3.3 percent from 2.7 percent and said the country should take more steps to curb its budget deficit. It also raised its growth forecast for China to 10.5 percent from 10 percent. The US and China are top consumers of oil and other commodities. US crude oil futures for August delivery settled at $75.44 per barrel on Thursday, up $1.37. That takes two-day gains to $3.46 per barrel, a 4.8 percent rise – the biggest two-day percentage gain since June 9-10. Prices rose as much as $1.83 to $75.90 a barrel earlier, the highest intraday price since June 30. Brent crude settled up by $1.20, or 1.63 percent, at $74.71 per barrel. Saudi Arabia had assumed a conservative price of around $45 for its crude in the 2010 budget but prices are projected to average nearly $70 a barrel, studies showed. “The fiscal and balance of payments' outlooks are both comfortable. Incremental gains in oil output coupled with stronger output of high-value condensates will keep export earnings growth robust,” the Saudi American Bank (SAMBA) said. “Oil revenue will rise in line with exports and non-oil earnings should be supported by increasing private sector import activity. Lagged effects of the capital spending surge in 2009 will see spending growth increase sharply this year, but the rate of growth should ease in 2011-2012. Overall, we expect the fiscal position to remain in surplus.” Jadwa Investments, in a separate study, projected that the Kingdom's income would reach SR626 billion, far higher than the budgeted income of SR470 billion. The surge in crude prices by around 55 percent above their assumed level will sharply boost the actual revenues and allow it to record a surplus. Jadwa predicted the government would again overshoot planned spending to around SR554 billion, creating a surplus of nearly SR72 billion against a shortfall of SR45 billion in 2009. The study also projected even a higher surplus of SR104 billion in 2011 due to an expected rise in revenue as a result of higher prices of an average $74 and an increase in the Kingdom's oil output from 8.3 million to 8.5 million bpd. Jadwa said the surge in oil prices would also give a shot in the arm to the Saudi economy and boost confidence that was hit by the crisis. It projected real growth at around 4.2 per cent in 2010 and 4.4 percent in 2011. Strong oil prices largely boosted Saudi Arabia's foreign assets over the past few years after a sharp decline in late 1990s because of persistent fiscal gaps.
