Is Aramco playing the oil Trump card to boost IPO valuation?

May 8, 2018 8:00 am


Oil is at highest in 4 years after Iran deadline was set by US President Donald Trump.

Fortune revealed that WTI oil rose above $70 a barrel for the first time since November 2014 “as traders braced for a re-imposition of U.S. sanctions on OPEC’s third-largest producer Iran.”

As a May 12, 2018 deadline nears, Trump threatened to pull out of a 2015 deal between Iran and a coalition of western powers that relaxed sanctions on the country in exchange for curbs on its nuclear program.

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According to Bloomberg, Iran came out against higher oil prices, signaling a split with Saudi Arabia, which is aiming for $80 oil.

Amir Hossein Zamaninia, deputy oil minister for international and commercial affairs, said in an interview Sunday in Tehran “A suitable price for (Brent) crude is $60 to $65 a barrel.

Just as quickly as they went up, oil prices could as easily drop down.

In a conversation with Fortune, Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen said: “If Trump should decide either to postpone or go for a surprise renegotiation of the deal, oil price could slump by $5 quite easily.”

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How’s your oil level?

Energy market consultant FGE has said that sanctions could cut Iran’s output by as much as 500,000 barrels a day by the end of this year.

US West Texas Intermediate (WTI) oil for June delivery climbed as much as 97 cents to $70.69 a barrel on the New York Mercantile Exchange and traded at $70.55 in Dubai, according to Fortune.

The U.S. oil rig count rose by 9 to 834, the fifth consecutive weekly increase, according to Baker Hughes data, a fortune 500 company.

Brent for July settlement rose 75 cents to $75.62 a barrel on the London-based ICE Futures Europe exchange Monday, according to Fortune.

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Saudi can’t be happier

Trump’s famous words in describing the Iran nuclear deal as “a horrible agreement for the United States” could in fact be the best thing anyone can say to favor Saudi Aramco’s privatization aims.

“OPEC and particularly Saudi Arabia continue to drop not so quiet hints about the importance of higher oil prices – for the cartel and the upcoming IPO of Saudi Aramco,” said Oil price.com, a prominent industry site.

OPEC will meet next month in Vienna.

According to Reuters sources, an audit of Saudi Aramco’s oil reserves as part of the preparatory work for its planned IPO has found the oil giant to have higher reserves than it previously reported.

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“Two sources, speaking on condition of anonymity, said the independent external audit has found the proven oil reserves to be at least 270 billion barrels, which is slightly higher than the 260.8 billion barrels the company reported in its 2016 annual review,” said Reuters.

“Having an internationally recognized reserves audit has become a key task for Aramco as it seeks to become the world’s most valuable company when it lists a 5% stake later this year or early 2019.”

While originally valued at $2trn, Aramco’ price valuation suffered as oil prices dropped, with many experts putting it more in the range of $1trn-$1.5trn, at best.

“Renewed U.S. sanctions on Iran may disrupt more than the Gulf nation’s oil exports,” said Bloomberg.

“Iran holds the largest proven reserves of natural gas, and its gas and petrochemical industries have continued to grow since sanctions curbs were eased more than two years ago.”

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Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.



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