Bankrupting OPEC.. One Million Barrels Of Oil At A Time

Jon Banking, Economy, Energy, Market Commentary

The world hasn’t really caught on yet, but OPEC is in serious trouble. Last year, OPEC’s net oil export revenues collapsed. How bad? Well, how about 65% since the oil price peaked in 2012. To offset falling oil prices and revenues, OPEC nations have resorted to liquidating some of their foreign exchange reserves.
The largest OPEC oil producer and exporter, Saudi Arabia, has seen its Foreign Currency reserves plummet over the past two years… and the liquidation continues. For example, Saudi Arabia’s foreign exchange reserves declined another $2 billion in December 2016(source: Trading Economics).
Now, why would Saudi Arabia need to liquidate another $2 billion of its foreign exchange reserves after the price of a barrel of Brent crude jumped to $53.3 in December, up from $44.7 in November?? That was a 13% surge in the price of Brent crude in one month. Which means, even at $53 a barrel, Saudi Arabia is still hemorrhaging.

This post was published at SRSrocco Report on February 25, 2017.