Saudi Arabia -- Update -- October 3, 2020

Re-posting from September 6, 2020:

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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So, Where Are We Today?
With The Most Recent Data -- August, 2020

From middleeastmonitor a few days ago.

The Saudi Ministry of Finance predicted on Wednesday that its budget deficit for the current year will stand at around 298 billion riyals ($79.5 billion), and that the public debt will rise to 854 billion riyals ($227.7 billion), while it could reach 941 billion riyals ($250.9 billion) in 2021.

Regarding other financial position indicators, the foreign exchange reserves curtailed, losing 105 billion riyals ($28 billion) last August, reaching 1.83 trillion riyals ($488 billion). [This figure is at odds with this source which shows 1.68 trillion rials ($454 billion).]

The sharpness of the collapse was due to the continuing decrease in oil prices and the grave repercussions of the coronavirus pandemic on the economy.

The general reserve of the kingdom dropped by 15 per cent last August, resulting in 422 billion riyals ($112.5 billion), while the general reserve has diminished by 56 per cent since the end of 2015.

The profits of Saudi banks dwindled during the first half of this year, by 40.9 per cent, reaching 13.15 billion riyals ($3.51 billion).

In the original post above, we estimated:

• 9 million bopd exports
• 2020 budget: $275 billion
• = breakeven of $83/bbl (compare with actual of about $45 at best)

So, what is Saudi averaging in exports this year? 6.25 million bpd

• wow
• $275 billion / (6.25 million * 365) =  $120-oil
  

No one is predicting $120 oil -- ever, ever. 

 

So, what's the average OSP for Saudi oil? Below is the OSP. The range has been between $40 and $46 all year. One wonders if there were discounts along the way to save market share:

Saudi's nightmare: a Biden presidency.

By the way, look at the export numbers.

At the end of 2019:

• Saudi needed $84-oil in 9 million bopd exports;
• in fact, they were exporting about 7 million bopd (that was before Covid-19 demand destruction);
• in 2020, Saudi is average 6.25 million bopd