Founder & CEO. Oil markets macro-analysis., Vanda Insights

Vandana Hari

Founder & CEO. Oil markets macro-analysis.

Vanda Insights

Vanda Insights is a Singapore-based boutique provider of intelligence on the global energy markets, launched in September 2016. The venture was born out of a desire to extract the signal from the noise in the complex and often volatile oil markets. Our succinct and clear macro analysis is relied upon by thousands of readers globally, including those doing business directly or indirectly in the physical commodity and derivatives markets; wealth managers; governments, regulatory bodies and think-tanks; as well as trade organizations and educational institutions.

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Commodities

It's official. The planned listing of 5% of <a href="https://www.smartkarma.com/entities/27317" target="_blank" data-smartkarma-citation="entities:27317:1">Saudi ARAMCO (131861Z AB)</a>, the "IPO of the century", is off the table.
<a href="https://www.reuters.com/article/us-saudi-aramco-ipo-exclusive/exclusive-aramco-listing-plan-halted-oil-giant-disbands-advisors-sources-idUSKCN1L71TZ" target="_blank">Reuters broke the story late Wednesday</a>, citing Saudi sources familiar with the situation. "The decision to call off the IPO was taken some time ago, but no one can disclose this, so statements are gradually going that way -- first delay and then calling off," Reuters quoted a source as saying. Financial advisors who had been working on the proposed listing have been disbanded, the report said.
Saudi Energy Minister Khalid al-Falih i<a href="http://www.arabnews.com/node/1360691/saudi-arabia" target="_blank">ssued a statement early Thursday</a>, which, at first blush, seemed like a denial of the Reuters story, but actually wasn't. 
“The Government remains committed to the IPO," Al-Falih said in the statement, but critically, qualified that it would happen "at a time of its [Saudi government's] own choosing when conditions are optimum."
Important for us in the minister's statement is what it did not say. Al-Falih did not say the government was committed to proceeding with the IPO in 2019, which is what had been telegraphed for the past several months and would have amounted to proving the Reuters story wrong. Nor did he mention any timeline for the listing.
What that tells us is that the IPO has been cancelled for now. It may be back on the table at some point in the future, which wouldn't be a surprise, given all the preparation that has already gone into it. And let's face it: why would anyone rule it out forever anyway? Keep the door open!
The IPO story has been closely tracked not only by the investment community, but also by all those directly or indirectly exposed to oil prices because of the implicit connection between then Saudi Deputy Crown Prince Mohammad Bin Salman announcing the plan in an interview with The Economist in January 2016 and the kingdom leading OPEC and a bunch of non-OPEC oil producers into a historic production restraint deal at the end of that year.
So, what should we expect from Saudi Arabia, OPEC, and the OPEC/non-OPEC partnership in actively managing output, now that the IPO is off the radar? We give you our take.

It's official. The planned listing of 5% of Saudi ARAMCO (131861Z AB), the "IPO of the century", is off the table.
Reuters broke the story late Wednesday, citing Saudi sources familiar with the situation. "The decision to call off the IPO was taken some time ago, but no one can disclose this, so statements are gradually going that way -- first delay and then calling off," Reuters quoted a source as saying. Financial advisors who had been working on the proposed listing have been disbanded, the report said.
Saudi Energy Minister Khalid al-Falih issued a statement early Thursday, which, at first blush, seemed like a denial of the Reuters story, but actually wasn't. 
“The Government remains committed to the IPO," Al-Falih said in the statement, but critically, qualified that it would happen "at a time of its [Saudi government's] own choosing when conditions are optimum."
Important for us in the minister's statement is what it did not say. Al-Falih did not say the government was committed to proceeding with the IPO in 2019, which is what had been telegraphed for the past several months and would have amounted to proving the Reuters story wrong. Nor did he mention any timeline for the listing.
What that tells us is that the IPO has been cancelled for now. It may be back on the table at some point in the future, which wouldn't be a surprise, given all the preparation that has already gone into it. And let's face it: why would anyone rule it out forever anyway? Keep the door open!
The IPO story has been closely tracked not only by the investment community, but also by all those directly or indirectly exposed to oil prices because of the implicit connection between then Saudi Deputy Crown Prince Mohammad Bin Salman announcing the plan in an interview with The Economist in January 2016 and the kingdom leading OPEC and a bunch of non-OPEC oil producers into a historic production restraint deal at the end of that year.
So, what should we expect from Saudi Arabia, OPEC, and the OPEC/non-OPEC partnership in actively managing output, now that the IPO is off the radar? We give you our take.

Aramco IPO Scrapped. What Does It Mean for Oil Prices?

Word on the street is that the "IPO of the century", the listing of a 5% stake in Saudi Arabia's crown jewel <a href="https://www.smartkarma.com/entities/27317" target="_blank" data-smartkarma-citation="entities:27317:1">Saudi Arabian Oil Co (131861Z AB)</a>, may not happen after all. While the odds certainly look stacked against it, especially in view of the challenges that have emerged with regard to an overseas listing, it may be too soon to write it off. 
Saudi Aramco appears to be marching full steam ahead to ready itself for a public sale. If anything, it has been bolstering its downstream business portfolio, both at home and abroad, even more vigorously in recent months. The move to acquire a "strategic" (read majority) stake in the Saudi petrochemicals giant <a href="https://www.smartkarma.com/entities/27316" target="_blank" data-smartkarma-citation="entities:27316:1">Saudi Basic Industries Corp (SABIC AB)</a>, announced last week, is the latest evidence that Aramco continues to execute on its vision to become a fully integrated giant. Aramco CEO Amin Nasser said over the weekend that the IPO may be delayed because of the negotiations over SABIC. 
<blockquote>
“If the deal is completed, with relevant regulations taken into account, it will definitely affect the timeframe for the partial IPO [initial public offering] of Saudi Aramco,” Nasser told Al Arabiya TV.
</blockquote>
Irrespective of whether, when and where the Aramco listing takes place, the kingdom, with support from  Russia, will ensure the OPEC/non-OPEC combine does not let go of the reins of the global oil market. Not only that, but over the coming months, it will increasingly fall upon Saudi Arabia, as the holder of the biggest spare crude production capacity in the world, to walk the tightrope between the oil price expectations of some of its more hawkish OPEC peers on the one hand and the major consuming countries on the other. Last week proved again that not only is it physically prepared for that tightrope walk, but also has the ability to  jawbone the market if needed, to keep crude in the new goldilocks range of $70-80/barrel.
We look at the implications of Aramco's bid for SABIC and its recent spate of downstream investments and assess the connection between the company's IPO plans and oil prices.  
<table class="table table-striped">
<tbody>
<tr>
<td>Contract</td>
<td style="text-align: center;">Jul 20 settle</td>
<td style="text-align: center;">Jul 13 settle</td>
<td style="text-align: center;">52-week high</td>
<td style="text-align: center;">52-week low</td>
</tr>
<tr>
<td>ICE Brent (Sep 2018)</td>
<td style="text-align: center;">73.07</td>
<td style="text-align: center;">75.33</td>
<td style="text-align: center;">79.80</td>
<td style="text-align: center;">48.06</td>
</tr>
<tr>
<td>NYMEX WTI (Aug 2018)</td>
<td style="text-align: center;">70.46</td>
<td style="text-align: center;">71.01</td>
<td style="text-align: center;">74.15</td>
<td style="text-align: center;">45.77</td>
</tr>
</tbody>
</table>
<div style="text-align: left;" class="content-caption">Source: CME (NYMEXT WTI), ICE (Brent). All prices are in USD/barrel. "Settle" refers to the day's closing price. All figures are for the most-active front-month contract on the given day. The 52-week high and low numbers are for the front-month contract's closing levels for the day.</div>

Word on the street is that the "IPO of the century", the listing of a 5% stake in Saudi Arabia's crown jewel Saudi Arabian Oil Co (131861Z AB), may not happen after all. While the odds certainly look stacked against it, especially in view of the challenges that have emerged with regard to an overseas listing, it may be too soon to write it off. 
Saudi Aramco appears to be marching full steam ahead to ready itself for a public sale. If anything, it has been bolstering its downstream business portfolio, both at home and abroad, even more vigorously in recent months. The move to acquire a "strategic" (read majority) stake in the Saudi petrochemicals giant Saudi Basic Industries Corp (SABIC AB), announced last week, is the latest evidence that Aramco continues to execute on its vision to become a fully integrated giant. Aramco CEO Amin Nasser said over the weekend that the IPO may be delayed because of the negotiations over SABIC. 

“If the deal is completed, with relevant regulations taken into account, it will definitely affect the timeframe for the partial IPO [initial public offering] of Saudi Aramco,” Nasser told Al Arabiya TV.

Irrespective of whether, when and where the Aramco listing takes place, the kingdom, with support from  Russia, will ensure the OPEC/non-OPEC combine does not let go of the reins of the global oil market. Not only that, but over the coming months, it will increasingly fall upon Saudi Arabia, as the holder of the biggest spare crude production capacity in the world, to walk the tightrope between the oil price expectations of some of its more hawkish OPEC peers on the one hand and the major consuming countries on the other. Last week proved again that not only is it physically prepared for that tightrope walk, but also has the ability to  jawbone the market if needed, to keep crude in the new goldilocks range of $70-80/barrel.
We look at the implications of Aramco's bid for SABIC and its recent spate of downstream investments and assess the connection between the company's IPO plans and oil prices.  



Contract
Jul 20 settle
Jul 13 settle
52-week high
52-week low


ICE Brent (Sep 2018)
73.07
75.33
79.80
48.06


NYMEX WTI (Aug 2018)
70.46
71.01
74.15
45.77



Source: CME (NYMEXT WTI), ICE (Brent). All prices are in USD/barrel. "Settle" refers to the day's closing price. All figures are for the most-active front-month contract on the given day. The 52-week high and low numbers are for the front-month contract's closing levels for the day.

Weekly Oil Views: Saudi Stewardship of Oil Prices Decouples from Aramco IPO

Saudi Arabia

Saudi Arabian Oil Co., doing business as Saudi Aramco, operates as an oil exploration company. The Company focuses on hydrocarbons exploration, production, refining, distribution, and shipping, as well as provides crude oil marketing services. Saudi Aramco serves customers worldwide.

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Saudi Aramco (ARAMCO AB)

Aramco IPO Scrapped. What Does It Mean for Oil Prices?

It's official. The planned listing of 5% of Saudi ARAMCO (131861Z AB), the "IPO of the century", is off the table. Reuters broke the story late...

Vandana Hari

Weekly Oil Views: Saudi Stewardship of Oil Prices Decouples from Aramco IPO

Word on the street is that the "IPO of the century", the listing of a 5% stake in Saudi Arabia's crown jewel Saudi Arabian Oil Co (131861Z AB), may...

Vandana Hari

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)