Gulf states to borrow billions to plug budget deficits

Discussion in 'General Trading Discussion' started by baudwalk, Apr 11, 2016.

  1. baudwalk

    baudwalk Senior Investor

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    http://www.middleeasteye.net/news/g...illions-make-budget-deficits-report-593242507
    Economics 101 -- the law of supply and demand -- is in play with Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates unable to control the supply of oil. Russia continues as a major exporter of oil, notably to China, supplying more oil than Saudia Arabia six times since November 2014. Without oil-producing countries around willing to control supply, the equilibrium at the intersection of the the supply and demand curves will remain in the lower-left quadrant of the graph.
     
    Last edited by a moderator: Jul 8, 2016
  2. remnant

    remnant Well-Known Member

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    This powerfully illustrates the situation of commodity prices in the future especially non renewable resources. It seems that diversification holds the key to a stable economy in Gulf countries. Overrelying on one product would leave them vulnerable to the nuances and fluctuations as well as the politics of oil prices. Cognisance of the fact that other energy sources are being developed coupled with their inability to influence demand and supply should encourage the development of thematically related industries and value addition.
     
  3. Rainman

    Rainman Senior Investor

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    I'm sure this will force them all [even if OPEC is dead] to cooperate, cut production or do whatever else will drive the oil prices up. Gulf States made a mistake and they are realizing too late that they did.

    http://www.reuters.com/article/us-opec-russia-idUSKCN0XH1ST
    Apparently oil prices will stay low for a really long time.
     
  4. GiltEdged

    GiltEdged Active Member

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    Oil prices are beginning to rise this week, but it seems to be driven by speculation rather than demand. The oversupply might be easing, but it's driven by oil outages like the Kuwait strike and current strong consumption. Once the price goes up, those factors may have less effect and if prices go up purely on speculation I'd be worried about a market bubble forming, only for over-supply to continue.

    The problem is that with the oil prices low, many producers are not tapping reserves or have simply put off developing potential oil fields outside the OPEC area. The presence of these known stockpiles is likely to keep the price low even if OPEC do manage to throttle their supply. If the price were to rise considerably, it suddenly becomes economic to develop these resources, supply goes up, and the price would drop again.

    If the Oil-producers are having to borrow to plug deficits, it doesn't look as though they have much faith in a sustained recovery, either.
     
  5. kgord

    kgord Senior Investor

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    Well I think that OPEC needs to diversify like everyone else. Over reliance on one product in this case oil, could spell disaster down the road. I think they need to find other things to export really. It doesn't sound like things are going great over there.
     

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