Saudi oil revenues plunged by more than 40% on a yearly basis during the first five months of 2020 as the Covid-19 pandemic hammered demand.

The decline was heightened by a brief price war, led by Saudi Arabia, against Russia for refusing to extend output cuts designed to prop up the oil market.

All Saudi oil is produced by Aramco, which is the world's largest oil company.

The allies in the Opec+ group later settled the dispute by ageing to record production cuts of 9.7 million barrels per day in April.

The value of exports dropped to 197.8 billion Saudi rials ($53 billion) from January to May this year, compared to 331.8 billion rials in the same period in 2019, according to official data.

Crude prices plummeted by more than 60% in March when the price war started at a time of weak global demand in the wake of the coronavirus and widespread economic shutdowns around the world.

The kingdom’s revenues are now rebounding thanks to the output curbs being led by Opec+ abd which came into effect in May, helping prices to recover amid declining supplies and an up-pick in demand following the easing of economic lockdowns.

Asset sale plans

However, drastic cuts by Saudi Arabia in support of the oil market will make it difficult for the kingdom to match last year’s revenues.

The revenue plunge is prompting Saudi Arabia to speed up plans to sell off state assets. Other options on the table include an unprecedented introduction of income tax.

The kingdom is expected to raise $13 billion over the next four to five years by privatising assets in the education, health-care and water sectors, Finance Minister Mohammed al Jadaan told Bloomberg last week.

The government sold a minority stake in Aramco last year as part of economic reforms undertaken by Crown Prince Mohammed bin Salman.

The government is “considering all options” to bolster its finances and while income tax isn’t “imminent” and “would require a lot of time” to prepare, the kingdom “isn’t ruling anything away for now,” he said.

The Saudi economy is set to shrink 6.8% this year, according to the International Monetary Fund, in what would be the deepest contraction in over 30 years.