Saudis wobble on timing of Aramco IPO, OPEC cuts

By Grant Smith on 1/25/2018

LONDON (Bloomberg) -- Saudi Arabia has insisted there’s no connection between plans to sell part of its state oil giant and an OPEC strategy that supports crude prices. But within days, it’s hesitated on the time-frame for both.

On Jan. 21, Saudi Energy Minister Khalid Al-Falih indicated it could be next year before OPEC and its allies can clear a supply glut. This could force the Organization of Petroleum Exporting Countries to extend its production curbs, he told reporters in Oman’s capital Muscat, as global oil markets might not rebalance as anticipated in 2018.

Three days later, at the World Economic Forum in Davos, Al-Falih said oil behemoth Aramco’s initial public offering will take place “ when the time is right.” While he hoped that right time will still be this year, it’s a change from previous assurances that one of the most anticipated IPOs will proceed later in 2018.

There’s a direct link between the OPEC policy spearheaded by the Saudis and their ambitions to value Aramco at $2 trillion, according to Commerzbank AG. Few outside the kingdom see that valuation as realistic.

“It’s all about the right price,” said Eugen Weinberg, Commerzbank’s head of commodities research in Frankfurt. “One of the goals of OPEC’s strategy, which was strongly led and influenced by Saudi Arabia, was indeed to hike prices in the short term, also in order to justify a high price tag for Saudi Aramco.”

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