Talk of this black swan gains momentum

Black Swan
Kerima Greene | CNBC

Speculation is rising that Saudi Arabia's oil price strategy will force the kingdom to give up its dollar exchange peg.

Just a whisper last fall, the talk about the riyal has been ongoing and picked up again after Saudi Arabia on Monday released its 2016 state budget, revealing a $97.9 billion deficit. The deficit is smaller than some expected, but the kingdom also announced spending cuts and tax increases. It also quickly announced increases in fuel, water and electricity prices, with prices on some petrol products reportedly rising more than 40 percent.

Riyadh's willingness to cut social programs, not oil production, helped spur expectations for even lower oil prices and oil futures traded lower Monday in part on that concern. Crude futures recovered much of their Monday losses in Tuesday trading.

Since many analysts see low crude prices continuing into next year, the question is whether Saudi Arabia can continue to support its budget and its strategy of letting the oversupplied oil market drive prices.

If the riyal were to be depegged from the dollar, analysts say the currency would crater and there would be an immediate surge in inflation in a country that currently has a low rate. There could also be a potentially steep drop in oil prices as markets assess the willingness of the world's biggest crude exporter to maintain market share at all costs.