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Tuesday, 6 December 2016

Saudi Arabia Switches OPEC Tack With Eye on World’s Top IPO - Bloomberg

Saudi Arabia Switches OPEC Tack With Eye on World’s Top IPO - Bloomberg:
"To understand why Saudi Arabia changed course and decided OPEC should go back to managing supply, look at two of the kingdom’s biggest policy challenges: the urgent need to plug holes in its budget and the plan to sell a stake in the state-owned oil monopoly.

Two years after the world’s biggest exporter backed the Organization of Petroleum Exporting Countries’ switch to a pump-at-will strategy to defend market share, Saudi Arabia’s oil minister promised to bear the biggest burden in curbing global supply. The market response suggests it may have been the prudent thing to do. By promising to cut production by just 4.7 percent, the country gained an 18 percent jump in oil prices.

The pain of prices below $50 had become too much for the Arab world’s largest economy. Saddled with budget deficits, the country cut spending and burned through more than a quarter of its foreign financial reserves in two years. The persistent price slump also threatened the centerpiece of the reforms sketched out by the country’s powerful deputy crown prince, Mohammed bin Salman: privatizing what could become the world’s biggest publicly traded oil company, Saudi Arabian Oil Co."

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