Royal trump: can Saudi Arabia to raise oil prices before the release of Saudi Aramco in the international market

Royal trump: can Saudi Arabia to raise oil prices before the release of Saudi Aramco at the international rhinocorura link
On 11 September 2019, 21:16

Vladimir Agoev
The most expensive company in the world Saudi Aramco in the near future may enter the global stock market. With the help of his Corporation Saudi Arabia intends to attract about $100 billion. However, for the successful sale of securities in the Kingdom needs higher oil prices. Due to what Riyadh can affect the value of the hydrocarbons at RT.

  • © Ahmed Jadallah/Reuters

Wednesday, September 11th, world oil prices are steadily growing in the course of global trades. Raw materials of benchmark Brent crude rose nearly 1.2% to us $63.1 per barrel. Such data leads the ICE exchange in London.

According to experts, markets have responded positively to the statement of the head of the largest oil companies in the world Saudi Aramco Amin Nasser. According to him, «soon», the Corporation of Saudi Arabia may enter the global stock market, the newspaper reported Arab News.

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The first public offering (IPO) raw giant could be the biggest in history. In total, the Kingdom is planning to sell 5% of the securities Saudi Aramco and to raise $100 billion As noted by Amin Nasser, Saudi Aramco’s IPO will take place on the Saudi stock exchange Tadawul, and later the company will be ready to go to overseas sites.

As previously stated, the crown Prince of Saudi Arabia Mohammed bin Salman, the total value of the Corporation is estimated at $2 trillion. This value is more than double the rate of most expensive companies on the world stock market. For comparison: to date, the market value of Microsoft is $1.03 trillion, Apple — $979 billion Amazon — $900 billion, Google (which owns Google Inc.) — $836 billion Such data results in the NASDAQ.

Note that even in 2017, the world’s largest stock exchange began to fight for the right to become a platform for the IPO of Saudi Aramco. For example, Donald trump has urged Saudi Arabia to place the shares of the company in new York. At the same time, the British government actively promoted the idea of listing in London and gave the Saudis a loan guarantee of $2 billion.

The idea IPO Saudi Aramco has been offered in 2016, and has become one of the main points of the reform program of Saudi Arabia «Vision 2030». The strategy aims to change the structure of the economy and reducing dependence on the Kingdom’s oil. As explained in an interview with RT chief analyst «BCS Premier» Anton Pokatovich, the implementation of these plans requires a lot of budget injections. A significant portion of these funds, the authorities plan to attract through the sale of shares of Saudi Aramco.

According to Pokatovich for a successful exit of the company on the stock exchange of Saudi Arabia need high oil prices. Meanwhile, over the past year, a barrel of energy commodities, Brent crude fell by almost $20. Thus, markets expect that before the planned IPO, the Kingdom will try to create more suitable conditions in the energy market.

«Investors have apprehended the message about the imminent IPO as a signal that Riyadh will soon make every effort to provide the necessary level of oil prices for the company on the stock exchange. Note that this signal is received by the market with great seriousness, because in the Kingdom there have been significant changes in the structure of «oil power,» — said the expert.

In early September after three years as head of the Saudi Ministry of energy left, Khaled al-Faleh. Moreover, the ex-Minister also left the position of Chairman of the Board of Directors of Saudi Aramco.

According to the Royal decree, the new head of the Ministry of energy appointed a former aide to Prince Faleh Abdul-Aziz bin Salman. According to the analysts, as a result of political shifts, the Kingdom may start to further cut oil production as part of the deal, OPEC+. The country’s actions will further reduce the supply of hydrocarbons in the world, and the prices for energy sources will grow faster.

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«In professional circles, the new energy Minister is known to have repeatedly sought the increase in oil prices in difficult circumstances. Now there is such a situation. Because of trade wars and deceleration of the world economy oil prices this fall are at risk to sink to the level of $50-55 per barrel of Brent. This is totally unacceptable for the economy and future development plans of the Kingdom,» added Bulls.

As explained by the expert, the majority of the countries — participants of the transaction OPEC+ satisfied with oil prices near $60 per barrel. However, the budget of Saudi Arabia may withdraw from a deficit only in the quotations above $80. Thus, as the analyst, the Kingdom is beneficial to pursue a more aggressive policy to reduce oil production.

Earlier, ex-Minister of energy of Saudi Arabia Khalid al-Faleh said that Aramco Saudi IPO can pass only in 2020-2021 years. According to Anton Bykov, up to this point, the authorities can deliberately stir the interest of market players and thereby influence the growth of quotations.

«The government of Saudi Arabia can use the IPO Saudi Aramco as a bargaining chip to influence oil prices. With the same ease it may leave again for an indefinite time. Therefore, as long as it is not declared the exact date of the shares placement, IPO Saudi Aramco should be treated rather as a tactical move than probable event», — concluded the Bulls.

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