While Saudi Arabia has started taking austerity measures to counter the falling revenues of its heavily-oil-dependent economy, the kingdom’s non-oil private sector
The non-oil sector’s Purchasing Managers’ Index (PMI) dropped for a second month in a row to a record low, and production and new orders increased at their smallest rates since record-keeping started.
Feeling the now serious sting of the low price of oil—its main cash cow—Saudi Arabia has
The oil-rich kingdom is also seeking to diversify revenues away from oil, but that’s not a quick solution, and until this transition happens, Saudi Arabia’s economic growth, oil or non-oil, is tightly tethered to crude oil prices.
Saudi Arabia, OPEC’s de facto leader, now needs oil prices greater than just stable. They need prices to be higher than current levels, and as such, Saudi Arabia is
Still, after the peak summer demand season ended, the Saudis could simply scale back to a level that is seasonally appropriate—a level they plan on anyway—and wrap it up with a bow and gift it as a ‘sacrifice’ for fellow OPEC members—and for the markets, who would probably temporarily respond favorably to a small cut, even if it mirrors regular seasonal cuts.
Unfortunately, with the growing camp of the members who are pleading exemption in OPEC’s production cuts - the latest being Iraq – Saudi Arabia may need to deepen cuts if it wants to convince the cartel it is ready to take one for the team.
Last week the market was caught by surprise by reports that Saudi Arabia and its Gulf OPEC producer allies had signaled that they would be
The Saudis will likely do some cutting, but it’s unlikely they will lower their oil output to two-year-lows.
By Tsvetana Paraskova for Oilprice.com
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