07 April 2011

Oil Price Floor?

The FT has an important but quiet article on a recent report by the IIF:
Saudi Arabia could need the oil price to average more than $100 a barrel by 2015 to sustain the big public spending rises it plans in an effort to forestall the political unrest sweeping the Middle East.

The oil market is growing increasingly worried about Riyadh’s fiscal needs as it fears that they could force Saudi Arabia to pursue oil policies similar to those of Venezuela and Iran, traditionally the price hawks at the Opec oil cartel.

The break-even oil price the Gulf kingdom requires to balance its budget will jump from $68 last year to $88 this and then $110 in 2015, according to new estimates by the Institute of International Finance, a leading industry group.