$50 or $60 Could be Make or Break Oil Prices for Saudi Arabia

 "As most of the rest of the world, also the Saudis have become path dependent; 1) maintain the peg, control price inflation through continued deflation of the money supply and get a full-blown banking crisis; or 2) alternatively, reflate the money supply, increase speculation in riyal forwards, devalue and get massive price inflation through the extremely important import channel. This obviously begs the question; at what oil price can the Saudi’s mange to muddle through without ending up in either 1 nor 2.  At today’s price of around USD50 / bbl Saudi Arabia will burn through USD90bn worth of reserves per year. This means under a mild deflationary scenario FX reserves will fall below M2 already by early 2018; even with a 10 per cent cost reduction. At 60 dollar and only 2 per cent reduction in cost Saudi Arabia will probably not have to worry about severing the peg.  Unless prices continue upwards, it will be interesting see what route, and which risks, the Saudi government is willing to take on. For now it appear route 1 is the preferred one, but as the banking crisis escalates we expect a gradual movement toward route 2. Unless oil prices spikes back to USD60 /bbl plus, and save the day. We doubt it!"

Saudi Authorities Panic - Ban Speculation On Riyal Devaluation Amid Banking Crisis | Zero Hedge:

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