Saudis May Be Cracking Under Oil Glut - Gainesville Coins News
No Minimum order! We accept Pay with Credit Card
Call Us: (813) 482-9300 Mon-Fri 9:00AM-6:00PM EST
Login or Register
Log into your account
About Gainesville Coins ®
Billions Of Dollars Bought And Sold A+ BBB Rating 10+ Years No Hidden Fees Or Commissions All Inventory Ships Directly From Our Vault

Saudis May Be Cracking Under Oil Glut

blog | Published On by
Saudis May Be Cracking Under Oil Glut

Saudi Arabia may be closer to cracking in the current bear market in oil, than their competitors are. Markets were awash with speculation after unnamed sources revealed that the Kingdom had opened discussion with multiple banks in securing up to $10 billion in loans. The government has had to curtail domestic borrowing after causing a liquidity crunch. Up to this point, Saudi Arabia has handled a record $100 billion annual deficit by selling foreign reserves and borrowing from Saudi banks.

This will be the first time in over ten years that Saudi Arabia has had to tap international loan markets. They should have no problem in securing the desired dollar-denominated loan, as the bank(s) that arrange this will be at the front of the line if the Kingdom decides to issue bonds. The Saudis had taken advantage of high oil prices in past years to retire a large portion of its debt.

The Saudis have not only been facing economic turmoil due to low oil prices, the decision to reduce or cut some of the lavish subsidies citizens of the kingdom enjoy is stoking social unrest. Subsidies and social spending were ramped up during the 2011 Arab Spring uprisings to buy off the population, but those measures are being rolled back since oil prices have fallen by 70%.


Cutting subsidies are one thing that the government may get away with, in small doses. Enacting new taxes would raise demands for popular representation in the government, something the royal family would never allow. Any dissent is ruthlessly suppressed, especially in the Shiite-heavy eastern provinces, but a 30% unemployment rate among males 15-24 years old means that the House of Saud is built on a demographic powderkeg.

Exacerbating the tight economic situation in Saudi Arabia is their support for Sunni Islamist militias in Syria that are attempting to overthrow the government, and the actual war against Shiites across their southern border, in Yemen.

While the focus has been on which shale drillers in the US would not survive the current oil market, more eyes are turning towards the Arabian peninsula. The Saudis are the only ones feeling the pinch. Qatar and Oman both recently took out foreign loans, of $5.5 billion a $1 billion respectively.

Signs of distress in OPEC's wealthiest members have oil traders hopeful that oil prices will soon rebound on production cuts. The surviving companies in the US shale fields just hope that they can hold out long enough for relief to arrive.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product

About the Author

Everett Millman

Steven Cochran

Precious Metals Market Analyst
BS University of South Florida (2002)

A published writer, Steven's coverage of precious metals goes beyond the daily news to explain how ancillary factors affect the market.

Steven specializes in market analysis with an emphasis on stocks, corporate bonds, and government debt. He writes a monthly review of the precious metals markets for

This site uses cookies for analytics and to deliver personalized content. By continuing to browse our site, you agree that you have read and understand our Privacy Policy.