Lianna Brinded

The price of oil has been below $60 a barrel all year, but Saudi Arabia, the world's largest oil producer, has remained quiet about how this is affecting the country's balance sheet.

Today we got a glimpse of the country's pain: Saudi Arabia has withdrawn $50 billion to $70 billion (£33 billion to £46 billion) over the past six months from global asset managers, according to the market intelligence company Insight Discovery. The Saudi Monetary Agency's foreign reserves have slumped by nearly $73 billion (£48 billion) since oil prices more than halved, the Financial Times reports.

Oil accounts for 80% of the country's budget revenues and 45% of its gross domestic product. So when oil prices fall, it hits the economy, especially if spending remains the same. Oil has fallen from over $100 a barrel in the summer last year to $45.32 as of today.

The massive withdrawals happened so Saudi Arabia could sustain its domestic economy, cut its widening deficit, and fund an ongoing military campaign in Yemen. In other words, Saudi Arabia has less money coming (from oil sales), but its spending needs remain the same.

The International Monetary Fund this month predicted that Saudi Arabia could run a budget deficit amounting to about 20% of GDP.

As a "swing producer," Saudi Arabia has the power to change the price of oil on its own. It is such a massive producer — 10.564 million barrels per day, as of June this year — that it can cut supply and watch the price of oil rise, if it wants.

Saudi Arabia, however, also wants to drive rival countries out of the oil market. The lower the price goes, the more non-Saudi oil companies go to the wall and the less oil those countries can produce. US oil production is already in decline. The endgame is that Saudi is willing to undergo short-term financial pain to emerge with a greater controlling share of the world's oil supply.

uk.businessinsider.com