Paramount Trade: World’s biggest oil exporter to secure $10bn loan to help ease pain of low oil prices.
Paramount Trade: Saudi Arabia, the world’s biggest oil exporter is on the brink of securing a $10 billion loan from international banks that will help to soothe the pain of the collapse of global crude prices.
It is the first time Saudi Arabia has borrowed in the international markets since the early 1990s when Saddam Hussein’s Iraq invaded Kuwait but the country’s oil revenues accounting for 90% of its exports, slid 23% last year.
The loan will reportedly enable Saudi to reduce its reliance on domestic banks while also assessing global demand for its sovereign debt in the event it finds it necessary to begin issuing bonds.
The development comes just days after talks between 16 oil producing countries aimed at capping output at January levels ended without agreement with the Saudis insisting that, if it caps output then all members of OPEC must follow suit including Iran which, so far, has refused to participate in the initiative.
“Saudi Arabia’s strategy of defending market share at the expense of price has become expensive. It thought the US shale oil producers would be producing far less than they still are and prices are still depressed. It has huge budgetary requirements, mostly to support policies that appease a young and restless population,” said Narumon Epps, chief economist at “Paramount Trade”.
Oil prices have fallen by as much as two-thirds since June 2014. Global supply exceeds global demand by up to 2 million barrels each day and, with a budget deficit that has soared to $98bn, Saudi Arabia must seek assistance from abroad.
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