Finance Minister Tom Marshall is expected this week to provide a mid-year update on the state of Newfoundland and Labrador's finances, and provincial officials are already warning of tough news.

Finance Minister Tom Marshall is expected to give an update on the provincial government's finances. (CBC)

Marshall projected a deficit of $258.4 million when he brought down the annual budget in April.

However, oil has traded below the benchmark price of $124 that the government put on its expectation of the average trading price for a barrel of Brent crude.

Premier Kathy Dunderdale has said that every dollar drop in the price of oil below that estimate translates into a hit of nearly $20 million for the provincial treasury.

The government has already announced cost-cutting measures. In July, for instance, spending on travel was curtailed, and some vacant positions were left unfilled.

Dunderdale said this summer that she was worried that the deficit for this year could climb as high as $700 million, because of the trend during the spring and summer months on oil prices. The price of Brent, though, increased in the subsequent months, but has not met the government target.

On Monday morning, a barrel of Brent was trading at more than $107.

Dunderdale has also said she is more concerned about the budget for the next fiscal year, because of oil prices remain low, the deficit could climb as high as $1 billion.

The financial statement will be watched closely by public sector unions, which are preparing for what is expected to be a tough round of bargaining.