Monday, March 5, 2018

Saudi's Foreign Exchange Reserves Take An Unexpected Dip -- March 5, 2018


March 9, 2018: Kemp must be reading the blog. I assume he has posted this data before but if he has, I have not seen it before. But now, after my monthly reporting of this data, his most recent post jumped out at me:

Story lines:
  • Saudi reserves were already dropping significantly by the time Saudi reacted with flooding the market with oil, hoping to "break" US shale
  • we will never know how "bad" it would have gotten for Saudi if they had not announced they were going to open the spigots
  • it is interesting: I think "we've" all forgotten the reason Saudi said they were opening their spigots; I do distinctly remember that the Saudis said it was not in reaction to US shale, and that they were not doing this to "break" US shale; I think they said they were trying to get the attention of the Iranians, which, in hindsight, seems an incredibly weak argument
  • look how long it took for the "recovery" even after Saudi said they would cut production
  • even with the cut in production and the "shakedown of the sheiks," the recovery is not particularly noteworthy

March 6, 2018: Saudi Arabia cuts price on its oil. Trying to re-grab market share. Good old "free markets." From Bloomberg via Rigzone:
Saudi Arabia cut pricing for Arab Light crude to Asia for the first time in eight months, a sign that the world’s largest oil exporter is fighting harder for sales in its biggest market.
State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude for April shipment by 55 cents to $1.10 a barrel more than the Middle East benchmark, the company said Monday in an emailed statement. It’s the first cut since August. Aramco had raised its January pricing to the highest since 2014 and kept it there for the next two months. The producer, known as Saudi Aramco, was expected to lower pricing by 45 cents a barrel, according to a Bloomberg survey.
Original Post 

Well, well, well, isn't this interesting. Just when it appeared that Saudi Arabia had turned the corner with regard to "foreign exchange reserves," a small hiccup, as they say.

In September, 2017, Saudi's foreign exchange reserves hit a recent low but then gradually increased (coincident with a number of things, including a shakedown of a hundred or so Saudi princes, but that's another story for another day).

Saudi's foreign exchange reserves showed a small increase over the next three month, but then, in January, 2018, the most recent month for which we have data, foreign exchange reserves fell. Considering that the price of oil has trended upward this past month, the decrease was unexpected. See chart below at this link:

Foreign Exchange Reserves in Saudi Arabia decreased to 1854380 SAR Million in January from 1861588 SAR Million in December of 2017. Foreign Exchange Reserves in Saudi Arabia averaged 2209808.62 SAR Million from 2010 until 2018, reaching an all time high of 2796941 SAR Million in August of 2014 and a record low of 1569145 SAR Million in April of 2010.

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