Notes From All Over, Early Tuesday Morning Edition -- March 31, 2020

Biden koan: another one. I can hardly wait until he posts his first haiku.

Canadian dollar: link here. Looks like 1.4205 overnight. Bloomberg noted the same thing about a week ago. Sources say that  the Canadian loonie hit its all-time low on January 21, 2002, sliding to 61.79 cents US. On January 7, 2016, the Canadian dollar stood at 70.95 cents US. Almost exactly one year ago, Financial Post warned Canadian dollar could sink to record low of 62 cents. If 70.95 cents was the 10-year low, then I believe the Canadian dollar has set a new 10-year record low, at around 70.42 cents US. [One hour later, 5:44 a.m. CT: looks like a huge jump -- now touching 1.4235 or 70.25 cents US.] [Mid-day trading:a high of 1.43241 or 69.812 cents US.]

Saudi, an existential issue: Saudi's oil war could bankrupt the kingdom. Warning: consider the source. From March 15, 2020:

Those with a functioning memory may have thought that last week’s (~ March 10, 2020) decision by Saudi Arabia to maximise oil production to crash oil prices and bankrupt U.S. shale producers was an early April Fool’s Day joke.

Apparently, though, it is not, and collective amnesia seems to have gripped senior Saudis and other OPEC members alike about how disastrous the last Saudi Arabia-led attempt to destroy the U.S. shale oil industry from 2014 to 2016 actually was. Appalling though the consequences were last time for Saudi and its now-much-poorer allies, this time around things are likely to be much, much, worse.

The last time the Saudis tried this exact same strategy in 2014, it had a much greater chance of success than it does now.

Back then, it was widely assumed that U.S. shale producers could not produce oil on a sustained basis for a breakeven price of less than around US$70 per barrel of Brent. Saudi also had record high foreign assets reserves of US$737 billion in August 2014, allowing it real room for manoeuvre in terms of sustaining its SAR-US$-currency peg and covering the huge budget deficits that would be caused by the oil price fall caused by overproduction. In addition, Russia at that point was just an interested observer on the sidelines.

Saudi Arabia was so confident in its plan that in October 2014 during private meetings in New York between Saudi officials and other senior figures in the global oil industry, as analysed in full in my latest book on the global oil markets, the Saudis revealed that the Kingdom was willing to tolerate Brent prices ‘between US$80-90 per barrel for a period of one to two years’.

This was a 180 degree turn from the previous understanding by other OPEC members that Saudi was their champion, doing its best to keep oil prices high in order to boost the prosperity of OPEC member states. Saudi, nonetheless, at the New York meeting, made it clear that it had two clear aims in pursuing its overproduction/oil price crashing strategy. The first of these was to destroy (or at least slow down progress in) the developing U.S. shale energy industry and the second was to pressure other OPEC members to contribute to supply discipline. This marked a significant divergence from the acceptable range of prices previously stated by then-Saudi Oil Minister Ali al-Naimi as being: “US$100, US$110, US$95,’ per barrel.

More at the link. Best part of the op-ed? The opening line, "Those with a functioning memory..." Well, that certainly leaves out the Democrat presumptive nominee for president.

But wow, we're back at $100+ as the real number the Saudis need to stay solvent. They are truly in deep doo-doo.

We should see Saudi's February, 2020, foreign reserve assets posted tomorrow.

More. A lot of typos in the article at this link, and not sure of the source, but the data points are very interesting.

• coming up against coronavirus
• Saudi Arabia, population, 35 million, foreign reserve assets: $440 billion
• Russia, population, 147 million, national welfare fund, $156 billion
• the power of the Saudis is limited. “The current oil prices put an end to the ambitious program of renovation of the country. The Ministry of Finance of Saudi Arabia intends to reduce budget expenditures in 2020 by 30%. Riyadh will be much harder to implement generous social obligations, which may lead to growing discontent in the Kingdom
• According to experts Bloomberg David Fickling, if the cost of oil prices even in the $50-55 (two times higher than it is now) by 2024, foreign exchange reserves, Saudi Arabia will fall to five-month sum of imports and just a few months Kingdom, considered one of the richest in the world, will be in “incredible crisis”.

It's very possible that in my lifetime I will see the fall of the House of Saud.