Saudi Aramco IPO Likelihood Gets a Boost

Yesterday brought a seismic jump for oil prices, with crude leaping up 5% to close well above $50/bbl for the first time since Dec 14. That such a gain would come following a rather bearish EIA report shows the strength of the rally. The large gain brings the up-streak to eight days, though profit-taking may bring the streak to an end. This morning crude oil is trading at $51.93, down 43 cents from yesterday’s close.

Fuel prices also saw lofty gains, more so for gasoline than diesel. Diesel prices rose over 5 cents (2.9%), while gas prices were up 6.3 cents (4.6%). This morning, diesel prices are $1.8816, clinging to yesterday’s closing price. Gasoline prices are $1.4188, down 0.7 cents since yesterday’s close.

Reports from China indicate that the recently finished US-China trade talks were extensive and provide a solid foundation for resolutions; however, neither country went so far as to offer concrete gains. The US has been pushing for China to purchase more American goods to reduce the trade deficit, along with reforms on technology and intellectual property rights. A deal would give an economic boost to both countries, increasing fuel demand and therefore propping up oil prices globally.

Saudi Arabia Shows Transparency over Oil Reserves

Yesterday brought news that Saudi Arabia is providing additional transparency into their oil business, allowing independent auditors to verify their oil reserves. More important than the figures themselves (the audit showed their reserves being almost exactly what the government had reported), the transparency brings renewed hope for a 2021 Saudi Aramco IPO.

Saudi Aramco, the largest oil company in the world, is set to list part of its business on a major stock exchange in 2021, raising roughly $100 billion for Saudi Arabia to use to diversify its economy. The Saudis were close to listing Aramco in 2018, but ultimately pushed the final decision down the road. Many suspected the required transparency of a stock exchange was a key component of the decision to delay the IPO; Saudi Arabia’s recent audit shows the country is not afraid of sharing details concerning Aramco.

This new transparency from Saudi Arabia comes after they’ve committed to push international oil prices back up to $80/bbl. The Saudi government’s budget is highly reliant on oil incomes, which is why they’re raising money to diversify the economy under their Vision 2030 plan. In 2017 and 2018, Saudi Aramco’s IPO was suspected to be a major driver of Saudi Arabia’s push for OPEC production cuts, as higher oil prices make the company’s list price higher. With a renewed drive for a 2021 IPO, expect Saudi Arabia to keep pushing for higher prices.