Another Update On Saudi Arabia's Foreign Exchange Reserves And Import Requirements -- September 6, 2020

Note: in any of my posts, there will be content and typographical errors. If any information in any post is important to you, go to the source.

At the moment, there are 34,167 blog posts on "The Million Dollar Way."

Of those 34,167 posts, I probably have a couple dozen notes of which I am particularly proud.

One post of which I am very, very proud is this one, posted just a few months ago on Saudi Arabia's foreign exchange reserves.

At that post these data points:

Back-of-the envelope:

• at $448.6 billion = 43 months of imports
• for four years = $500.8 billion
• = $125 billion / year
• Saudi Arabia exports 7 million bopd, link here;
• 7 *365 = 2,555 million bbls/year
• = $50/bbl to pay for imports

Saudi Arabia's 2020 budget, as projected in December, 2019, link here:

• revenue forecast: 833 billion riyals ($222 billion)
• a budget deficit of 187 billion riyals ($50 billion)
• 2020 budget: 1,020 billion riyals ($272 billion)
• $275 billion / 2.555 billion bbls/year exports = $107.63
• let's imagine 9 million bbls/day crude oil exports = 3.285 billion bbls/year
• $275 billion (annual budget) / 9 million bopd export = $83.71 

So, until someone comes up with different numbers, it appears that at the end of 2019, Saudi Arabia:

• needed $84-oil on 9 million bopd export
• they are currently exporting about 7 million bopd
• at 7 million bopd, Saudi Arabia needs, in round numbers, $110-oil
• OPEC basket: slightly under $30 today and it has been much lower this year
  

So, where are we today?

CEIC is reporting, as of June, 2020:

Saudi Arabia's foreign exchange reserves equaled 38.3 months of import in December, 2019. Its money supply M2 increased 9.9 % year-over-year in June, 2020.

You know, patting myself on the back, in June, 2020, just a few months ago, I suggested Saudi Arabia's foreign exchange reserves would "cover" 43-months-worth-of imports. 

I had not previously seen the CEIC report in which analysts suggested the Kingdom had reserves enough to "cover" 38.3 months of imports at the end of 2019.

CEIC also noted that mid-year (2020), the Kingdom's cash reserves had increased by 9.9% year-over-year.

38.3 * 1.099 = 42 months. I had come up with 43 months. Wow, not bad for an ex-government employee. LOL.

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Those Pesky Import Expenses

One has to assume that is "push comes to shove," Saudi Arabia can cut back on a lot of "nice-to-have" imports and move to "need-only" imports. It won't make the peasants happy but that could easily double the number of "import" months to "cover."

And, oh by the way, news today:

• Saudi Aramco is dialing back its official selling price for crude oil for Asia;
• crude oil demand in Asia is described as "tepid";

Bottom line: it appears Saudi Arabia needs $55-oil to pay for imports. That figure was derived prior to the mandatory $75-billion dividend to be paid annually by Saudi Aramco for the next five years.