Recent turmoil in global markets, originating in China and spreading to markets globally, have put added pressure on an already battered price of oil as investors look for the bottom.
Oil has fallen by about $60 in the last year, and instability in markets this week has increased downward pressure on the commodity with a 6% decrease in price since Friday. Writing in the Wall Street Journal, Summer Said and Bill Spindle report that fears of China’s economic weakness “has eroded an important pillar of Saudi Arabia’s strategy of pumping freely to grab global market share.”
Now, all eyes are turning toward OPEC. The next scheduled meeting is not until December 4th 2015. “Yet with oil getting walloped daily, some think it could come much sooner—and that the oil cartel may be forced to send a message to stanch the bloodbath in crude markets,” writes Alexandra Gibbs of CNBC, who notes that a growing consensus is emerging that it may come down to Saudi Arabia to provide direction.
The drop in oil price is bad news for Saudi Arabia, which relies heavily on oil revenues to balance its budget. The Kingdom is now working advisors on how to cut billions of dollars from next year’s budget because of the slump in crude prices, according to two people familiar with the matter as reported by Bloomberg.
The government of Saudi Arabia “is in the early stages of the review and could look at cutting investment spending, estimated to be about 382 billion riyals ($102 billion) this year, by about 10 percent or more” while current spending on areas such as public sector salaries wouldn’t be affected, according to the report.
