Saudi Arabia to run out of $$$ cash in 5 years says IMF

[Daran]

http://money.cnn.com/2015/10/25/investing/oil-prices-saudi-arabia-cash-opec-middle-east/index.html?sr=twcnnbrk102515oilpricessaudiarabiacashopecmiddleeast512pStoryMoneyPhoto

Saudi Arabia to run out of cash in less than 5 years

October 25 NEW YORK

Not even the mighty Middle East can survive cheap oil forever.
If oil stays around $50 a barrel, most countries in the region will run out of cash in five years or less, warned a dire report from the International Monetary Fund this week. That includes OPEC leader Saudi Arabia as well as Oman and Bahrain.
Low oil prices will wipe out an estimated $360 billion from the region this year alone, the IMF said.

Huge budget surpluses are quickly swinging to massive deficits as oil prices have crashed to around $45 currently from over $100 last year. Many of these countries are being forced to tap into rainy day funds to weather the storm.
"Oil exporters will need to adjust their spending and revenue policies to ensure fiscal sustainability," the IMF wrote.

The depressed oil prices have come at a time when spending has gone up as many of these countries are grappling with regional violence and turbulence in financial markets.

Saudi Arabia is getting squeezed

Saudi Arabia, the world's largest oil producer, needs to sell oil at around $106 to balance its budget, according to IMF estimates. The kingdom barely has enough fiscal buffers to survive five years of $50 oil, the IMF said.

That's why Saudi Arabia is moving fast to preserve cash. The kingdom not only raised $4 billion by selling bonds earlier this year, but its central bank has yanked up to $70 billion from asset management firms like BlackRock (BLK) over the past six months.

After years of huge surpluses, Saudi Arabia's current account deficit is projected to soar to 20% of gross domestic product this year, Capital Economics estimates. Saudi Arabia's war chest of cash is still humungous at nearly $700 billion, but it's shrinking fast.


Spending cuts ahead

Saudi Arabia is unlikely to jack up taxes, but it is poised to cut at least some forms of spending.
It's not likely to cut social and military spending programs as leaders fear a repeat of the 2011 Arab Spring uprising.

"In an environment with regional insecurity and domestic instability, to chip away at that social contract is a bit of a political gamble," said Henry Smith, a Dubai-based associate director with consultancy Control Risks.

Yet Smith said big government spending projects are already seeing far greater scrutiny.
"Some of the projects that are less economically essential are quietly being sidelined," Smith said.
Related: Saudi Arabia's oil policy 'does not help anyone'
Iran, Iraq under pressure

Iran's break-even oil price is estimated at $72 and it could survive cheap oil for less than 10 years, the IMF estimates. It's a rosier outlook compared to its neighbors. But Iran's outlook is clouded by potential sanctions relief (which hasn't come yet) and a surge in oil production from its nuclear deal with the West.

Iraq has virtually no fiscal buffer remaining, according to the IMF. The country is grappling with internal strife and has lost large swaths of land to ISIS.

"Violence increasingly affects civilians, and has a particularly adverse effect on confidence and expectations, and consequently on economic activity," the IMF warned.
Bahrain is also under great financial pressure, with the likelihood of also running out of options in less than five years. The country already has lots of debt and has been running deficits for several years in a row.

"They are in a relatively tight spot. They are going to have to undertake a more significant tightening," said Jason Tuvey, a Middle East economist at Capital Economics.


UAE, Kuwait and Qatar can survive decades of $50 oil

However, a handful of countries are well positioned to face the storm. Topping that list are Kuwait, Qatar and the United Arab Emirates. That's partially because these countries don't need sky-high oil prices to balance their budgets.

Kuwait's break-even oil price is estimated by the IMF at just $49, or just a tad higher than current levels. The magic number is believed to be $56 in Qatar, the host of the 2022 World Cup, while the UAE needs $73 oil.

But these three countries have built up mountains of oil money that protect them during the leaner times. The IMF said the UAE has enough fiscal buffers to withstand $50 oil for nearly 30 years. Qatar and Kuwait can sustain cheap oil for almost 25 years.

Economists of tuner, what is the scenario for Trinidad?

[K74T]

IBDaran


Wait.....

[Daran]

Scary...

[zoom rader]

All they need todo it is cut oil production, but that will upset Americas plan in staving Russians and Vennies financially.
Another backfire by the US

[Redman]

Everybody seems to ignore the fact that the Saudis are CHOOSING to keep oil production high.

If they cut their oil production by 10% ...what would the price of oil do?

[EmilioA]

Everybody seems to ignore the fact that the Saudis are CHOOSING to keep oil production high.

If they cut their oil production by 10% ...what would the price of oil do?

Exactly the Saudis have calculated that low oil prices will hurt thier rivals --Russia, Iran and the North American Oil sand /oil shale producers--more than it hurts them. Saudi will hike back prices before they run out of cash .

[RBphoto]

Funny thought that they would make more money by cutting oil production.

[makatak]

Dont believe everything the IMF says... you have countries that built their entire economy on oil and gas for generations but somehow think they are stupid enough to not plan for when it runs out?? smh

[EmilioA]

Funny thought that they would make more money by cutting oil production.

10.25 million barrels of oil at $50 vs 9.75 million barrels at $100 . Who making more money ?

[RBphoto]

Funny thought that they would make more money by cutting oil production.

10.25 million barrels of oil at $50 vs 9.75 million barrels at $100 . Who making more money ?

Math is hard.

[Dizzy28]

Less money is good for all those Gulf states. Their cash funds instability though the numerous proxy groups they support (Syrian rebels, Yemeni rebels etc.) Heck the Saudis funded the Pakistani Nuclear programme.

[Allergic2BunnyEars]

Surprised Daran didn't knit pick this article but throws local institutions under the bus. Article is dumb. "Country will run out of money if it spends more than it earns. News at 11." As if SA didn't do this intentionally with a plan. Everyone has an agenda. IMF is no different.

[Redman]

Funny thought that they would make more money by cutting oil production.

it isnt about the day to day revenue from oil in the near term...

Lower prices crushes the new producers that have higher costs and kills the FINANCING model....having a wave of bankruptcies and failures makes financing hard for years to come.

Lower WTI also changes the dynamic for alternative energy financing.....with oil at 50 less alternatives make sense economically...

The ISIS financing issue also makes their expansion harder....keeping the Sauds in play.

like makatak said they have the best information money can buy.

[Habit7]

"Country will run out of money if it spends more than it earns. News at 11."

LOL

[desifemlove]

eh...cool scene. arabs have savage mind..hence isis. and dey does flog people and not let women drive, and does let pilgfrims to Mecca die.....not sorry for dey.

[axe]

it was all about market share...not more money in the short- med term

[Hyperion]

Funny thought that they would make more money by cutting oil production.

it isnt about the day to day revenue from oil in the near term...

Lower prices crushes the new producers that have higher costs and kills the FINANCING model....having a wave of bankruptcies and failures makes financing hard for years to come.

Lower WTI also changes the dynamic for alternative energy financing.....with oil at 50 less alternatives make sense economically...

The ISIS financing issue also makes their expansion harder....keeping the Sauds in play.

like makatak said they have the best information money can buy.

And I think this is a big part of the Saudi end game, putting the hurt on all the new producers who invested in fracking and shale oil, expecting that the price would stay high enough to make the investment worthwhile.

[ismithx]

Dont believe everything the IMF says... you have countries that built their entire economy on oil and gas for generations but somehow think they are stupid enough to not plan for when it runs out?? smh

trinidad?

[antlind]

Dont believe everything the IMF says... you have countries that built their entire economy on oil and gas for generations but somehow think they are stupid enough to not plan for when it runs out?? smh

trinidad?

LOL!!!!!

[lostboys crew]

So what they doing here when oil reserves dry up. What plans the PNM party put in place to diversify the economy and prep us for the future. I refer to the PNM since they held power and resources longer than all other political parties combined.

[Redman]

Last number I saw was that we had 700 M bbls.

Do the math.

[zoom rader]

So what they doing here when oil reserves dry up. What plans the PNM party put in place to diversify the economy and prep us for the future. I refer to the PNM since they held power and resources longer than all other political parties combined.

Rowley does say he want more local food so that may be a clue.

[EmilioA]

So what they doing here when oil reserves dry up. .

Well Moonilal flying out . That;'s why he buy that shopping mall in the Netherlands. Or was it Anand that buy the mall... I need to check my sauces.

The rest of us...well the women could join the Venes and Colombians on the sex circuit going to Curacao and St Marten. Some fellas could become Rastitutes servicing the older white tourists.

The rest of we go have to learn to learn to cut cane again.

[airuma]

Funny thought that they would make more money by cutting oil production.

it isnt about the day to day revenue from oil in the near term...

Lower prices crushes the new producers that have higher costs and kills the FINANCING model....having a wave of bankruptcies and failures makes financing hard for years to come.

Lower WTI also changes the dynamic for alternative energy financing.....with oil at 50 less alternatives make sense economically...

The ISIS financing issue also makes their expansion harder....keeping the Sauds in play.

like makatak said they have the best information money can buy.

I must say, Redman does make some of the more intelligent post on this forum. Early September this year I read that Royal dutch shell had to stop exploration in Antartica I believe. Surely the low oil price contributed to this, I think they took a blow by investing too much in shale oil.

What kind of debt does Saudi Arabia have compared to USA?

This issue is geopolitical, IMF has an agenda, the agenda of it's top contributors.

[Hyperion]

Well TT and Venezuela are close to signing off on shared development of the Loran Manatee field, a delegation is in Caracas right now. I know is gas and not oil, and of course most of that profit going to hit Atlantic LNG and Chevron. Maybe somebody with a lil more insight could estimate the national revenue from this.

[zoom rader]

Well TT and Venezuela are close to signing off on shared development of the Loran Manatee field, a delegation is in Caracas right now. I know is gas and not oil, and of course most of that profit going to hit Atlantic LNG and Chevron. Maybe somebody with a lil more insight could estimate the national revenue from this.

Hmm, Big brother USA will be watching this

[Dizzy28]

Well TT and Venezuela are close to signing off on shared development of the Loran Manatee field, a delegation is in Caracas right now. I know is gas and not oil, and of course most of that profit going to hit Atlantic LNG and Chevron. Maybe somebody with a lil more insight could estimate the national revenue from this.

Is the delegation across there right now to discuss gas or the "Oil for Goods" Programme that Venezuela wants to implement with us??

[Hyperion]

Well TT and Venezuela are close to signing off on shared development of the Loran Manatee field, a delegation is in Caracas right now. I know is gas and not oil, and of course most of that profit going to hit Atlantic LNG and Chevron. Maybe somebody with a lil more insight could estimate the national revenue from this.

Is the delegation across there right now to discuss gas or the "Oil for Goods" Programme that Venezuela wants to implement with us??

Yep

http://www.trinidadexpress.com/20151026 ... uro-summit

[xtech]

Cheap oil is forcing Saudi Arabia to think the unthinkable -- cutting government subsidies on gas.



Drivers in Saudi Arabia get massive discounts on gas, paying less than 10% of average prices in Europe, according to the International Energy Agency.

But that perk costs the Saudi government enormous amounts each year. Saudi Arabia spends about 10% of GDP -- roughly $60 billion -- subsidizing gasoline, diesel, electricity and natural gas.


http://money.cnn.com/2015/10/27/news/ec ... =obnetwork

[RASC]

Clearly PNM voodoo at work over there!