Saudi Arabia plans to raise $27 billion on the bond market by the end of 2015, says the Financial Times. Needing a $106 per barrel crude price to balance the budget, it's trying to mitigate the 47 percent decline in oil.
Riyadh is planning to issue $5.3 billion in bonds each month until the end of the year, in tranches of five-, seven- and 10-year terms, the paper reports, quoting its banking sources.
In July, Fahad al-Mubarak, the governor of the Saudi Arabian Monetary Agency, announced the first issuance of the Kingdom’s bonds in eight years. He said that Saudi Arabia had already issued $4 billion in national bonds.
Riyadh has spent $65 billion of its fiscal reserves since the oil decline began, down from the $737 billion maximum in August 2014, FT says.
If the information on the bond issuing plan is confirmed, this would justify that Riyadh wants to continue its government spending as if the oil price hadn’t fallen from $115 per barrel in June 2014 to less than $50 this week. Saudi Arabia keeps bankrolling high-cost infrastructure projects, public sector wages and a war in Yemen.
The irony is that Saudi Arabia played a key role in crushing the oil prices. This June in Vienna, Riyadh-dominated OPEC confirmed its November decision not to cut crude output from 30 million barrels a day.
The cartel’s decision is often referred to a so-called price war that aims to smash the US shale boom. Shale oil is difficult and expensive to extract; it can be cost-efficient only if oil market prices remain somewhat high.
The Saudi-triggered oil plunge has yielded in the short-term, as the rig count has reduced 60 percent since its peak in October, when there were 1,609 active rigs in the US.
Despite the promises at least not to increase the output, OPEC oil production in July rose to about 32 million barrels per day.
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