Saudi Arabia budget deficit continues to grow to astronomic levels

Fuel Fix:

Saudi Arabia’s push for OPEC’s first oil production cut in eight years comes as its finances fall into disarray.

The Saudi government’s budget deficit has ballooned to one-fifth of its economic output this year despite its $57 billion in spending cuts since oil prices collapsed. That’s about twice the size of the U.S. deficit in 2009, the worst year of the so-called Great Recession, energy research firm Wood Mackenzie estimates in a new report.

The Kingdom has pushed back major infrastructure projects, cut state employee wages and burned through $180 billion in financial reserves, a quarter of its coffers, as oil prices have languished under half the $92 a barrel oil price it needs to balance its government budget.

Mounting financial pressure on Saudi Arabia and other key Middle Eastern oil producers is one reason analysts believe the Saudi-led Organization of Petroleum Exporting Countries has a better chance of reaching a deal to curb oil production at a formal meeting in Vienna on Wednesday than it did in April, when the cartel scuttled a similar deal.
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OPEC has lost the ability to manipulate pricing for oil and gas.  The Saudi gamble on a play for market share only made their predicament worse.  The Russians are not a member of OPEC, however, they have tentatively agreed to a freeze of production.

The problem for the cartel is that all but one or two of its members is losing money at the current price and they cannot really afford to cut back production in the hopes that prices will rise.  Its members still try to get the price up with suggestions of a production freeze are reduction, but they never seem to deliver on those commitments.