$20 Oil? Goldman Says It's Possible | Zero Hedge

$20 Oil? Goldman Says It's Possible | Zero Hedge



We’ve long framed collapsing crude prices as a battle between the Saudis and the Fed. 



When Saudi Arabia killed the petrodollar late last year in a bid to bankrupt the US shale space and secure a bit of leverage over the Russians, the kingdom may or may not have fully understood the power of ZIRP and the implications that power had for struggling US producers. Thanks to the fact that ultra accommodative Fed policy has left capital markets wide open, the US shale space has managed to stay in business far longer than would otherwise have been possible in the face of slumping crude. That’s bad news for the Saudis who, after burning through tens of billions in FX reserves to help plug a yawning budget gap, have now resorted to tapping the very same accommodative debt markets that are keeping their competition in business as a fiscal deficit on the order of 20% of GDP looms large.



But even with a gaping hole in the budget and an expensive proxy war raging in Yemen, it’s not all bad news for Saudi Arabia as evidenced by King Salman’s lavish Mercedes procession upon arrival in DC last week and as evidenced by the fact that, as The Telegraph reports, non-cartel output is beginning to fold under the pressure of low prices. Here’s more:........