Notes From All Over, The Saudi Edition -- April 2, 2020

Saudi Arabia foreign exchange reserves, update:

• how the Saudi decision to launch a price war is reshaping the global oil market, The Fairfield Sun Times, April 2, 2020, updated three hours ago.
• President talks with Prince MBS, and almost immediately Saudi Arabia calls emergency OPEC+ meeting, Asharq Al-Awsat, April 2, 2020, 18:45 (GMT?)
• Emerging-Market Petrostates are about ready to melt down: collapsing oil prices risk igniting a sovereign debt crisis, Foreign Affairs, April 2, 2020; of all the sources posting right now, this may be the most important, Foreign Affairs is practically the New Testament for Air War College and the other military senior staff officer schools in residence;
• Saudi Arabia's oil war could bankrupt the kingdom, oilprice.com via Yahoo!News, March 15, 2020, previously posted;
• This is probably one of the best -- but very biased -- consider the source -- Russia shows resilience to oil shock while Kazakhstan wobbles, EuroMoney, April 2, 2020 (which would be today):

Compared with Saudi Arabia, which requires a break-even oil price of more than $80 per barrel, Russia’s is around half that and energy minister Alexander Novak has further claimed with some bravado that Russian oil production is competitive at any price. This explains why, so far, Russian authorities have been reluctant to come to some sort of arrangement with Opec to limit production, despite Trump’s hopes for a deal buoying the market in recent days. It means the oil price shock effect will be much less pronounced for Russia than most other oil exporters. Indeed, preliminary data from Euromoney’s first quarter survey – to be officially released next week – shows risk scores worsening for oil-producing countries as diverse as Egypt, India, Indonesia, Malaysia and Norway.

Worst affected are Iran and Iraq, given their myriad other heightened economic and political risks. In those two countries, the fiscal shocks are likely to be most severe and less easily absorbed. By contrast, Russia has built up substantial foreign-exchange reserves, it has a flexible exchange rate and an extremely strong and resilient fiscal position, with room to support the economy using fiscal and monetary stimuli – and its overall country risk score has shown resilience as a result. Finance minister Anton Siluanov refuses to fret, pointing out that Russia has a sovereign wealth fund topped up with last year’s budget surplus worth $157 billion (11% of GDP). This can be used to cover the budget gap in any crisis for a period of four years, with $580 billion-worth of foreign-exchange reserves available to cover a decade of low oil prices.

• The oil price shock, who's most vulnerable? Council on Foreign Relations, two weeks old, March 19, 2020. This article introduces a new concept: the external breakeven price is hte price of oil required for a country to balance its external accounts.

One would assume Prince MBS needs to pay off foreign creditors before paying off the 15,000 Saudi princes. Prince MBS needs Brent at about $54/bbl to pay foreign creditors. At $54/bbl, he can pay foreign creditors, but he has nothing for himself or his own country (on a cash flow basis) -- assuming I understand this correctly. The delta between $54/bbl and the oft-quoted $83/bbl is the amount needed to run the country and provide the lifestyle to which he and the 15,000 princes have grown accustomed.