Saudi Arabia Contemplates IPO for Aramco
August 13th, 2019
Crude oil prices closed up slightly but refined fuel product prices fell slightly yesterday. The spread between WTI crude oil and Brent crude oil closed at only $3.64, a very low point for this year.
Rising crude oil prices were mainly driven by Saudi Arabia wanting an IPO for Aramco soon, a drop in European crude oil stocks, Baker Hughes reporting a drop in crude oil rigs, a large rise in China crude oil imports, Saudi Arabia vowing to keep oil exports low, Saudi Arabia wanting to discuss more output cuts with OPEC members, and concerns of supply disruptions in the Middle East.
The state-run oil company, Saudi Aramco, is ready to launch what could be the world’s largest initial public offering of which the government will decide when the IPO will take place based upon its perception of the optimum market condition.
Saudi Aramco has signed a letter of intent with India’s Reliance to potentially buy a stake in its refining and petrochemicals business.
Many experts now see the Saudis needing a higher oil price for its IPO and willing to do whatever it takes to push crude oil prices higher prior to the IPO.
Kuwait’s oil minister said today that Kuwait is very committed to the current OPEC+ output cut agreement cutting more than agreed upon. He said fears of a world economic slowdown are exaggerated and that global oil demand will pick up in the second half of 2019.
Goldman Sachs lowered its Q4 U.S. GDP forecast by 0.2% down to just 1.8%, citing larger than expected impact of U.S. and China trade wars. Goldman does not expect the trade disputes between the U.S. and China to be resolved prior to the 2020 U.S. presidential election.
Germany’s economic institute said in its quarterly survey of 1,200 experts in 110 countries that the economic outlook has deteriorated worldwide due to the U.S. & China trade dispute escalating.
The International Energy Agency (IEA) reported in a monthly report last week that world oil demand growth from January to May was at its lowest since the financial crisis of 2008. IEA said that world oil demand growth was hurt by many signs of economic slowdowns and ramping up of U.S and China trade wars.
The EIA stated in its monthly drilling productivity report that US oil output from seven major shale formations is expected to increase by 85,000 bpd in September to 8.77 million bpd. The largest change is forecast in the Permian Basin of Texas and New Mexico, where output is expected to increase by 75,000 bpd to 4.42 million bpd in September. US Bakken oil production in September is seen up 3,000 bpd at 1.436 million bpd, while US Eagle Ford oil production is seen down 5,900 bpd at 1.383 million bpd.