A Bank of America energy strategist says "A de-peg of the Saudi riyal is our number one 'black-swan' event for oil in 2016"
This is not a fresh piece of news, BTW, its from Friday. But there is a bit of chatter about on it.
- Saudi Arabia's foreign exchange reserves still provide an ample buffer
- But they have been falling fast
- "Should Brent crude oil prices drop to $30, we estimate the foreign exchange reserve drain could accelerate to $18bn per month. Saudi Arabia may face a critical choice: cut oil supply, or de-peg"
The riyal has been pegged to the USD for 30 years
As oil prices have fallen, oil exporters with more flexible currencies have seen theirs depreciate and thus somewhat 'cushion' the impact of falling prices ... not so Saudi Arabia.