RIYADH (Bloomberg) -- Saudi Arabia, the world’s biggest crude exporter, continues to cut its dependence on oil revenue due to the slump in oil prices, even as the kingdom keeps boosting production to defend its market share.

 

The kingdom’s revenue from oil sales will make up about 70% of the budget next year, John Sfakianakis, a Riyadh-based economist and a former adviser to the government, said by phone. State revenue from oil will be 73% in 2015, compared with 89% in the previous year, according to a statement posted on the finance ministry website earlier Monday.

 

“The kingdom reduced its dependency rate on oil revenues in 2015 and it will do the same in 2016 to overcome any negative impact from the decline in oil prices,” Sfakianakis said. “It’s very clear that Saudi Arabia will continue with its oil policy of defending its market share in 2016 as it prepared itself for low oil price environment.”

 

Saudi Arabia announced its first budget under King Salman, who ascended to the throne in January, amid plans to gradually cut subsidies and sell stakes in government entities to counter the drop in oil revenue. The kingdom also announced on Monday that it was raising domestic fuel, power and water prices, according to the official Saudi Press Agency.

 

The kingdom has led the Organization of Petroleum Exporting Countries to decide on Dec. 4 to abandon the group’s limits on output amid efforts to squeeze higher-cost producers, such as Russia and U.S. shale drillers, out of the market. Saudi Arabia produced 10.33 MMbopd in November, up by 830,000 bopd since the end of last year, according to data compiled by Bloomberg.

 

Revenue Decline

 

Oil dropped from a three-week high as Iran repeated its goal of boosting crude exports after sanctions on the nation are lifted. Brent for February settlement fell $1.17, or 3.1%, to $36.72/bbl on the London-based ICE Futures Europe exchange. Prices touched $35.98 on Dec. 22, the lowest since 2004.

 

Saudi Arabia forecast revenue to decline to 513.8 billion riyals ($137 billion) in 2016 from 608 billion riyals this year. Revenue from oil sales in 2015 will be 444.5 billion riyals down by 23% from 2014, according to the finance ministry statement.

 

“The 2016 budget is the first budget in more than 10 years that is based on an oil price of less than $50/bbl for Brent. This signals that the Saudis are ready for the new market reality in 2016,” Sfakianakis said.