Tuesday, November 8, 2016

Law Of Big Numbers And Why I Love To Blog -- November 8, 2016

In a long and complicated note on October 31, 2016, I estimated that the Saudis were pulling about $7.1 billion out of their cash reserves every month to cover "payroll." (That's in addition to whatever positive cash flow they had on oil exports and refined petroleum exports.)

Today, John Kemp, Reuters analyst based in London, tweeted:

So, that's pretty cool. Confirmation that at current oil prices, Saudi is pulling about $7 billion out of cash reserves every month to cover its "payroll."  Obviously it will change month-over-month, but $7 billion/month seems about right when oil is in the upper 40's.

In the graph above, note that it was in October, 2014, that Saudi Arabia mentioned that it was going to maximize production, regardless of price, to maintain global market share.  Look how fast things changed: by the end of the next quarter, they were deep "into the orange."

Any Doubts That Saudi Arabia Is In Trouble?

Regular readers are aware of the number of big-dollar projects that Saudi Arabia has canceled in the past two years because of their $1 trillion mistake.

Now, over at The Saudi Gazette, the headline: "private sector dues to be cleared by December 31, 2016; signing of SR1 trillion mega projects halted."

The "private sector dues" has to be with all the domestic debt and IOUs the Saudi Arabian government owes its employees, contractors, and citizens.

But in addition, the "act" just signed will also "modify" $266 billion worth of "mega" projects.

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