The Saudis cut but it’s not what you think. It's not oil production but spending as they try to get their budget under control as plunging oil prices are tearing them apart. Saudi Arabia said it will lower its record $98 billion state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatization. They are even talking about raising the cost of gasoline by as much as 50% and raising the cost for electricity and water in King Salman’s first budget. This may not sit well with the average Saudi citizen who was spoiled with the late King Abdullah giveaways. Oil took it as a negative because the budget was only 15% off their GDP as opposed to 20% giving them a sense that the Saudi kingdom is prepared to take more pain regardless of what their citizens think remains to be seen.
WTI is up today with a slight rebound in in the Shanghai Composite as well as the expectation that the U.S. will ship its first oil since the 1970’s. The negatives continue to be the warm weather and the oil glut! We will get the American Petroleum Institute supply report to think about.
Natural gas was the big mover yesterday as the market was shocked that winter actually can happen. Shorts are on the run. More cold ahead.