Oil prices have plummeted to a four-year low, posing significant challenges for Saudi Arabia’s budget, which heavily relies on oil revenues to fund its extensive economic transformation initiatives. The decline is attributed to a combination of factors, including increased oil output from OPEC+ members and escalating trade tensions between the United States and China.
Brent crude, the benchmark for Middle Eastern oil, has experienced a drop of approximately $10 since early April, settling around $66 per barrel. This downturn is influenced by OPEC+’s decision to incrementally reverse previous production cuts, adding 2.2 million barrels per day over an 18-month period starting April 2025. Key contributors to this increase include Saudi Arabia, Russia, and the United Arab Emirates.
The International Energy Agency has revised its global oil demand growth forecast downward, now projecting an increase of 730,000 barrels per day for 2025, the lowest since 2019 excluding the pandemic period. This adjustment reflects concerns over the impact of trade disputes on economic activity, particularly between the U.S. and China.
Goldman Sachs has adjusted its Brent crude forecast, anticipating an average price of $63 per barrel for the remainder of 2025, with a potential decline to $58 in 2026. The bank cites increased supply from OPEC+ and the risk of a global recession due to trade conflicts as primary factors.
The fiscal implications for Saudi Arabia are significant, as the kingdom’s budget is heavily dependent on oil revenues. The government may need to consider tightening fiscal policies, seeking alternative financing methods, or introducing new taxes to mitigate the impact of reduced oil income.
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