Facing Dire Financial Straits, Saudi Arabia Delays Contractor Payments To Preserve Cash
by Tyler Durden
ZeroHedge.com
10/19/2015
One narrative we’ve recounted time and again over the past six or so months revolves around the extent to which Saudi Arabia has put itself in dire financial straits by stubbornly keeping crude prices artificially suppressed in an effort to i) bankrupt the US shale space, and ii) pressure the Russians.
In some respects, pushing prices lower was probably a good gamble as far as the odds are concerned. That is, if one were placing bets last November on whether uneconomic US producers would be able to hold out for a year with sub-$50 crude and on whether Moscow would eventually agree to be a bit more friendly geopolitically speaking once the combination of low oil prices and crippling Western economic sanctions had time to sink in, one would have been inclined to think that Riyadh would have gotten its way by now.
But that’s not what happened.
The cost of capital is still basically zero which has served to keep US oil production online (even as it has fallen from April highs) and as for Russia, well, betting that Putin would give up Assad turned out to be a very, very bad gamble.
And so, the Saudis have found themselves in an awkward position. Competition in the US still isn’t bankrupt (although it’s by no means clear how much longer insolvent American producers can hold out) and the prospects for some kind of Saudi-Qatari-Turkish energy cooperation in partnership with a friendly Damascus are getting more remote by the day.
The Rest…HERE
