Saudi de-peg from Dollar identified as a possible "Black Swan" market event
While Bank of America reckons that a de-peg black swan is "highly unlikely" in 2016, they may be closer to the truth with the way the Kingdom is desperately fighting for its life (amid coup rumours), dealing with a collapsed oil industry and fighting a raging proxy war with Iran in Yemen. And just recently recently the IMF warned that Saudi Arabia could be bankrupt in 5 years. We pointed out all these developments in a recent article. At some point something has got to give... such as Saudi's dwindling FX reserves. We think another even graver "black swan" is the abandonment of the petro-dollar as a result of a possible change in allegiances. As mentioned in our previous article, Russia is moving to control OPEC through its alliance with Iran. Saudi Arabia (Dedan in the Bible) will be on the opposing camp against Israel in the coming Psalm 83 war and a fence-sitter in the coming Ezekiel 38 War. It's just a matter of when.
Submitted by Tyler Durden via Zero Hedge
As we noted recently, BofAML fears "a depeg of the Saudi riyal is the number one black-swan event for the global oil market in 2016," adding that it is "a highly unlikely but highly impactful risk." Given the recent action in Saudi Riyal forwards - the market's best guess at where the oil-ruch nation's currency will trade in the future - the chance of the black swan 'de-peg' is its highest since 2002. Besides this morning's "whatever it takes" moment, which oil markets quickly shrugged off, amid heavy subsidies to keep the people calm and the costs of wars in Yemen (and more in Syria), weak oil revenues leave The Sauds with few options (outside of the load the nation with ever more debt program): It's either stop it with the whole flooding an oversupplied market strategy, or let the peg fall before reserves runs dry.
