Deputy Crown Prince Muhammad Bin Salman, second deputy premier and minister of defense, first announced in April the decision to sell less than 5% of Aramco in an Initial Public Offering (IPO), valuing the company at between $2 trillion and $2.5 trillion. (At lower prices, shale oil becomes uneconomic.) His departure doesn’t represent a reversal of this policy, however-quite the opposite.
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He said demand for Saudi Aramco’s oil is increasing and the company is meeting that demand. “Iran, even now, is indicating that it could be willing to join a production freeze agreement”, he added.
“Oil prices held as concerns over the impact of raging fires in Alberta, Canada, on supply from the oil sands projects lingered”, ANZ bank said on Monday.
Kuwait and Saudi Arabia have still not resumed production from the Khafji field in the offshore zone between the two countries.
Baker, who served under President George H.W. Bush and joined a US delegation to meet Saudi Arabia’s new king past year, told a gathering of oil industry dealmakers that changes like the Aramco IPO could help the kingdom address unemployment and budget deficits amid weak oil prices.
The crash has ravaged the budgets of producer countries, led to widespread lay-offs in the oil industry and triggered concerns about stability in several of Saudi Arabia’s fellow Opec members, including Venezuela and Nigeria.
The contango structure of the Oman-Dubai market, where oil for later months is more expensive than that for immediate delivery, made it all but certain that the OSP would rise to reflect the higher prices for later-dated cargoes.
Naimi has always tried to use Saudi financial muscle and oil supply scale to drive out higher-cost producers or rivals during oil market downturns.
Saudi Aramco, which pumps more than one in every eight barrels of crude globally, is at the centre of a reform programme being pushed by Prince Mohammed, who has emerged as the man holding the levers of power in Saudi Arabia. Al-Falih is respected, but he doesn’t have (paywall) the long-standing ties with OPEC that al-Naimi had, so his ability to keep the cartel working in concert is in question. The capacity expansion at Shaybah by 250,000 barrels a day is meant to compensate for decreasing output from other maturing fields, according to Reuters.
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However, the new minister is not about to introduce policy changes just yet. That suggests we’re in for an bumpy ride.
