The oil price continued to decline, and the pressure on Saudi Arabia is increasing against the background of the currency peg refusal. According to the analytical agency the contracts, which are used for trading on the exchange rate of riyala over the next 12 months rose to record highs in the last 13 years. The next day, the upward movement was held in the correction. Six-month contracts on Friday also showed an increase to a record level over the past seven years.
Saudi Arabia continues to work in the highest possible rates of oil production this year. Country directs activities of the all cartel to protect its market share, despite the fact that Brent crude oil recently reached the lowest level in six years. Oil revenues are falling, and Saudi Arabia is forced to use their savings and sell debt in order not to lose its peg to the dollar. According to a report from Bank of America Corp., it is clear that the kingdom is now facing an important choice: to reduce production next year for pushing the price or adjust the exchange rate to slow down the weakening of foreign exchange reserves.
"Unbinding the national currency of Saudi Arabia - is a very unlikely event, but at the same time there is quite a significant potential impact on the precedent, - says a leading strategist of Bank Of America Francisco Blanch in his report Nov. 19. - If we choose a political factor as the main, it should first reduce the rate of oil production, but not to enter a deep devaluation of the currency." At Bank of America believed that the weakened global demand and inflation, besides the growing dollar, has a strong pressure on commodity prices denominated in dollars. Last week, Brent crude oil led trading at $44.66 per barrel, against last year's the decline was 44%.