Oil market – Update on Saudi Arabia
I have a backlog of energy articles to discuss. Will start posting some of them, starting with the precarious position of Saudi Arabia.
3/29 – Financial Times (I think) at RT.com – Saudi Arabia loses oil market share in key countries – Russia and Iran are pricing and marketing aggressively around the world. So much so that Saudi Arabia has dropped back from the largest exporter in nine out of the 15 largest markets. That loss has taken place over the last three years.
4/12 – AP at Bakken.com – Weak oil prices prompt Fitch to cut Saudi Arabia’s rating – The rating company cut Saudi Arabia to AA- from AA. This follows a downgrade from S&P earlier in 2016. Fitch is making an assumption of oil priced at $35 and $45 in 2016 and 2017.
3/1 – The Million Dollar Way – Business Insider Provides Update on Saudi’s Sad Situation – Saudi Arabia’s foreign reserves have dropped from $752B in 2014 before they started the price war to $602B in January 2016. That is a $150B drop in about a year and a half.
Rate of decline averaged about $15B per month in the November through January timeframe. That is about the same as the February through April timeframe of 2015. Graph of the monthly change clearly shows the impact of their price war on their reserves. Prior to opening the spigots, the monthly change was a bit up or a bit down. Starting in about February 2015, the monthly drain has been huge.
Another linked article suggests Saudi Arabia has between three and five years of reserves at $30 per barrel pricing.
Try this on for a burn rate: reserves of $602B divided by $15B monthly burn gives 40 months. That would be 3 1/3 years at the current burn rate. Borrowing $10B, as is rumored, will cover about three weeks drawdown of reserves.