Here in the US, oil has to keep the oil company profitable.
In Saudi Arabia oil has to keep the state profitable. Government agencies are funded by oil. Government welfare programs are funded by oil. The royal family is funded by oil.
Being a kingdom, the royal family in essence owns the state. The state owns Saudi Aramco. Thus, 80% of all government money comes from oil.
Actual production costs might be low, but government expense requirements are high .
Reports I have read, place Saudi Arabias actual need for oil cost around $86-$88/bbl, to keep the government solvent.
SA produces about 9.7 million bbl per day. That's about 3.54 billion bbl a year. At $40 a bbl below whats needed, that's about $141.62 BILLION a year deficit.
$141 billion might seem small in comparison to our deficits, but Saudi Arabia has a population of 28 million vs the US of 316 million.
Reports I have read, place Saudi Arabias actual need for oil cost around $86-$88/bbl, to keep the government solvent.
I see it over $100 for income to match outgo. Less than that requires less government spending or continued spending of cash reserves, like they are now. It can only stay low so long before the reserves are gone.
http://graphics.wsj.com/oil-producers-break-even-prices/