Posted on 11/18/2019 1:08:59 PM PST by SunkenCiv
The oil-rich kingdom hopes that if it keeps a lid on oil production next year the long-awaited initial public offering (IPO) of Saudi Aramco may fetch a good price on its market debut in the next two weeks.
Samba Capital, one of the banks involved in the IPO, said on Friday that almost 90% of the bids from institutional investors had come from Saudi Arabia. The “foreign” investors that made up the balance included banks and asset managers from within the Gulf region.
https://www.theguardian.com/world/2019/dec/01/saudi-arabia-oil-price-stock-market-debut-aramco-ipo
The prospectus said the government will have a “statutory lockup period” for disposing of any shares after the listing for six months, and a contractual lockup period for 12 months. Aramco cannot list additional shares for a period of six months after trading starts, and will also be restricted from issuing additional shares for 12 months.
https://dailystockdish.com/saudi-aramco-prospectus-flags-risks-gives-few-details-on-ipo-size/
Was Iran trying to push down the oil price?:
10NOV2019 Iran discovers new oil field with 50 billion barrels of crude Iran's president has described a massive find in the oil-rich Khuzestan province. But sanctions against Iranian oil could make it difficult for the oil to find its way to international markets.
https://www.dw.com/en/iran-discovers-new-oil-field-with-50-billion-barrels-of-crude/a-51188348
It is difficult to guess the oil price and the coming weeks will be interesting. Sunday 1 DEC oil price 60.45 USD/bbl https://www.bloomberg.com/quote/CO1:COM
Iran has increasingly accepted responsibility for the September 14 attack on Saudi Arabia's Aramco oil facilities in Abqaiq and Khurais, doing away with the pretense that it was an attack carried out by Houthi rebels in Yemen. The admission has been made in snippets and leaks, the way a regime like Tehran prefers to send a message.
Will Iran target Aramco again when it is listed later in December? That will possibly increase the oil price and lower the Aramco price.
The oil-rich kingdom hopes that if it keeps a lid on oil production next year the long-awaited initial public offering (IPO) of Saudi Aramco may fetch a good price on its market debut in the next two weeks.
Thanks AdmSmith. The IPO success does hinge on the price of crude, so that mitigates against another Iranian attack on the the KSA. OTOH, if the facilities are going to be under intermittent attack, that'll cause the IPO to tank. Whattayaknow, I am risk-averse...
Do not invest grandma’s money!
No problem there, both my grandmothers were flat broke.
I don’t believe one bit in global warming. The boy’s cried wolf a few dozen times too many. But I still would love to see a new fuel, better than the fossil fuels, simply because it causes too much trouble. Primitives from Africa to Indonesia are being wiped out, driven out and robbed when oil is found on their land. And fatass, worthless countries such as KSA are making off like bandits. Somebody’s got to design cold fusion reactors that work, or something, anything. So long as it does the job.
Liquid hydrocarbons have a very high energy density and are very efficient. If we get energy at a low cost we can produce synthetic fuel that is even better with less pollution from particles and PAH.
Price of crude slipped upward. Apropos of nothing, the stock exchanges would benefit from a table with lines of ground-up mood stabilizers. :^)
Long article about KSA manipulation of the share price
https://seekingalpha.com/article/4312522-saudi-aramcos-share-price-market-manipulation-suggestions
SAR 38.00 now:
https://markets.businessinsider.com/stocks/aramco-stock
Despite higher oil price (now 66.66) https://www.bloomberg.com/quote/CO1:COM
the stock price is down (now 35.50). The market value is down more than $400B since Wednesday.
Saudi Arabia's crude exports for December have only averaged ~6.1 mb/d so far.
We think this is related to the Abqaiq facility attack back in September.
Immediately following the attack, the Saudis wanted to reassure the markets that it can fulfill any demand needs.
Q4 is also seasonally the highest demand quarter of the year, while Q1 is the lowest. By switching the maintenance into Q1, Saudis blunt the impact of the outage.
But this means we may not have seen the full effects of Abqaiq yet, so we see this as a positive tailwind going into Q1 2020.
https://seekingalpha.com/article/4313949-saudi-arabias-december-oil-exports-drop-to-year-to-date-low
Abqaiq is toast for a long time.
The thread below discusses the impact on the oil market with some historical perspective and some technical issues regarding the “Neutral Zone” that was established in 1922 between Saudi Arabia and Kuwait:
https://markets.businessinsider.com/stocks/aramco-stock
MbS has arrested Prince Ahmed bin Abdulaziz, King Salman’s younger brother, Prince Mohammed bin Nayef, the king's nephew and a former crown prince, and Nayef’s brother, Prince Nawaf bin Nayef,
https://www.albawaba.com/news/riyadh-arrests-three-prominent-saudi-royals-alleged-coup-1343294
Will MbS announce that he is the new king?
Short trials, no appeals, beheadings? Bing, bang, done.
very interesting. Thnx
Now there is a big war about the oil market:
Having supported the OPEC’s additional oil cut decisions through cooperation with Saudi Arabia at the end of 2016 due to low oil prices, Russia had cut its output three times in the last four years. But with each output cut to boost oil prices, Saudi-led OPEC countries and Russia’s market share went to U.S. shale oil producers.
Nice graphs here https://www.bloomberg.com/news/articles/2020-03-07/putin-dumps-mbs-to-start-a-war-on-america-s-shale-oil-industry
A lot will be written about this the coming days...
At least on the surface, the current situation looks similar to previous oil-driven declines in Russian markets during 2014 and 2016. In both cases, drops in ruble and stock values led to economic crises that brought about decreased production and income throughout Russia. This time may be different, however: Russia is better prepared for an oil shock than it has ever been before. Its national reserves are extremely high, much of its government’s income is in dollars (making ruble devaluation advantageous), and many of its budgetary expenditures are in rubles. Meanwhile, Russia’s inflation levels are at historic lows (about two percent per year), meaning that the Central Bank may even welcome a rise to 3.5 or four percent.
If the epidemic spins out of control around the world, however, Russia’s economy will take a bigger hit than almost any other. According to calculations from Bloomberg, the outbreak may cause a 4.8 percentage point decrease in annual GDP growth, sending the country’s economy into a deep recession
Oil: Saudi Price War Scenarios
The conclusion we reached over the weekend is that this price war will only last 3-6 months.
Any duration past 6 months will result in such a severe drop in US oil production, that the decline overwhelms the OPEC+ production increase.
With Brent now trading at $33/bbl, Russian crude is now selling for $24/bbl as Saudi’s OSP cut was designed to destroy Urals pricing.
Rosneft’s breakeven is around $50/bbl Urals, so by June, it would’ve taken a bloodbath of $10 billion in 3 months. If it lasts into the end of the year, it will have lost half its market cap to this price war.
At the moment, we would assess the probability of the cuts as follows: End of June price war - 75% probability. Meeting in April - 15%. Meeting in March - 10%.
https://seekingalpha.com/article/4330764-oil-saudi-price-war-scenarios
A comment by DBR01:
The lockup period for Aramco IPO is 6 months for Saudi retail investors to be entitled for their 1:10 bonus shares. So that will be mid June. A lot of Saudis citizens subscribed to this IPO.
Moscow's initial position was to extend the agreement without additional cuts for the second quarter. Also, Moscow did not exclude the possibility of extending the OPEC deal even further.
For Russia, the new cuts would have meant cuts of additional 300,000 bbl/day, bringing the total cuts to 600,000 bbl/day, which is technologically challenging.
Sorokin stated that oil prices in the range of $45-55 per barrel are fair and will allow to invest in projects and keep supply coming.
He believes that oil prices will increase to $40-45 per barrel in the second half of 2020 and continue their upside to $45-50 in 2021.
In a Russian-language version of the interview, he added that while the ruble-denominated price of 3,000 per barrel is very comfortable, prices in the range of 2,100-2,500 rubles per barrel are satisfactory.
Currently, it looks like Russia is very serious about sticking to its new position and trying to deal a blow to the U.S. shale, both for political and for longer-term market share reasons.
https://seekingalpha.com/article/4331452-russia-explains-why-killed-opec-deal
Today Aramco is trading at 28.60 SAR
https://markets.businessinsider.com/stocks/aramco-stock
and oil is 26.12 USD/bbl https://www.bloomberg.com/quote/CO1:COM
Currently, Saudi reserves are approx. $450 billion with the Debt/GDP at under 25%. A $30 billion incremental price war hit does not matter too much. In fact, it makes sense for Saudi Arabia to use its maximum crude pumping strategy in an attempt to weed out the weaker players. Not just US shale but across-the-board; offshore, oil sands to name a few. How successful this strategy will be is debatable. Notwithstanding, it is worth trying and might help in the medium to long-term by thinning the herd of shale plays. This is the reason recent reports of talks between US producers led by Texas and Saudi should not be any reason for excitement. Oil needs demand-side fixes. Until that time, there is not much incentive for Saudi Arabia to end the price war.
https://seekingalpha.com/article/4333668-saudi-arabia-not-much-incentive-to-end-oil-price-war
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