In 2015, Saudi Arabia’s revenue from oil made up 70% of the country’s overall revenue. This year, falling oil prices are taking a toll on those revenues. Deputy Crown Prince Mohammed bin Salman described his country as being “addicted to oil.” The Prince also told a Saudi news channel that the kingdom can “live without oil by 2020.”
Saudi Arabia is pushing for a plan that will involve a lesser dependence on oil revenue. Diversifying its economy, investing in mineral mining and expanding its military will be part of the plan. “Vision 2030” will include an IPO of 5% of state-run oil company Saudi Aramco to create a massive wealth fund, and as stated above, the shifting of dependence from oil to other economic markets. You would think that this so-called vision is being implemented because of the possibility of lower crude prices as we move into the future, but the Saudi Prince stated that “the vision has nothing to do with crude prices.” He also made a statement about how Saudi Arabia can deal with the lowest prices possible. It seems the Saudis are confident they will continue to be an oil power into the next decade, but will consider other options to diversify their economy.
As for today’s market, the U.S. dollar is weaker, down -$.446. The dollar has an inverse relationship to crude prices and that is a key indicator of the bullish price action we are witnessing today. Diesel is up $.0400, gas up $.0500, and crude up $1.34 as of 12:30 PM E.S.T.
- Iraq’s oil exports in April are running at a record pace of 3.43 million barrels per day.
- Mexican crude output is steady since February, but exports are down 14%.
- The Fed is meeting today and tomorrow and there are currently no expectations of news that will shift the market.
- BP said that it could cut capital spending further after reporting an 80% drop in profits in the first quarter of the year, when prices were near their 13 year low.