Saudi Forging Ahead To Bankruptcy?

Saudi Forging Ahead To Bankruptcy?

With record production of 10.564 million barrels per day in June 2015, Saudi Arabia has been one of the major driving forces behind the current oil price slump.

The Saudis have kept their production levels high since last year in order to drive other players (especially U.S. shale drillers) out of business. Equally clear is the fact that this strategy of maintaining the glut and driving out rivals hasn’t worked so far.

Read the full article here:

The OES Opinion:

Whilst it may be that the oil price is lower still, statistically the Saudis and other OPEC members and indeed any analyst will know these down turns have lasted 18-24 months and we are not even really 12 months in yet.

On top of that the price of production in Saudi and the cost of refining is a fraction of what most other producers have.

Also to be considered is that while Saudis budget deficit may be enormous at the moment the known Saudi reserves aside their oil and gas wealth are somewhere in excess of usd 600 billion and on top of that there are sovereign and private wealth funds.

Even in this current climate, Saudi government debt is well under 10% of economic output for the last year, with the heavily depressed oil price. At that level it is amongst the lowest in the world.

It is borrowing, because money is cheap and its reserves earn well. First time it’s borrowed since 2007, which was, oh yes the last oil price drop when it went from over USD 84 down to around USD 60 and then the global financial crisis hit. Be clear that these borrowings are less than 1% of Saudis formal reserves currently.

While there may be a drop ongoing for a number of months historically plus some months to come, is it realistic to surmise that panic is setting in and the outlook is bleak… I certainly don’t think so, things will recover and Saudi can weather a long and harsh economic storm.

The post Saudi Forging Ahead To Bankruptcy? appeared first on RU Breaking News.