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Dan Dicker

Dan Dicker

Dan Dicker is a 25 year veteran of the New York Mercantile Exchange where he traded crude oil, natural gas, unleaded gasoline and heating oil…

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What Saudi Bonds Say About Where Oil Is Headed

The Saudis have floated their first sovereign bonds, a $17.5 billion dollar offering that was more than 6 times oversubscribed. This bond issuance gives us tremendous insight into the largest OPEC member, their thoughts on the trajectory of oil and where we probably should look for investments in the coming years.

Saudi Arabia, besides being the largest and strongest member of OPEC, has begun a major effort to change itself. Earlier this year, it launched the ‘vision 2030’ program to much fanfare, designed to move the Saudi economy away from its singular focus on oil. The death of King Abdullah and succession of King Salman prompted the development of ‘Vision 2030’ which includes social and educational reforms. In charge of this new policy is young Prince bin Salman, who has risen quickly to power ahead of much older and more senior princes like al Nayef, who was thought to be the likely successor to King Salman, now more than 80 years old.

But outside of these family politics there remains an oil question that the Saudis are trying to answer – how long can they depend solely on the revenues from their lone oil commodity?

The aggressive bond offering just completed gives us an indication that the Saudis, alongside their family turmoil, are feeling economically panicked as well.

Otherwise, why would they begin their capitalization of oil assets now, when oil prices are still only hovering at a relatively low $50 a barrel?…

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