For Timing Of Aramco IPO, Watch Forward Oil Price Curve

For Timing Of Aramco IPO, Watch Forward Oil Price Curve
It's the burning question in the oil industry: when will Saudi Arabia pull the trigger on the Aramco stock market listing?

'Sweet Spot'

The Saudi government says Aramco is worth $2 trillion and aims to list on one or more foreign stock exchanges in addition to Riyadh.

Saudi sources have said the listing on a local bourse could happen before the international listing. It is not clear if the forward oil price indicator will be a key consideration for the timing of a local listing.

The IPO is a central part of the crown prince's reform drive aimed at restructuring the kingdom's economy and reducing its dependence on oil revenue. The prince is also one of the architects of the output production pact between OPEC and Russia.

While Saudi officials think $60 per barrel is a reasonable price for oil in the long term, the rally at the start of 2018 has provided an incentive to bump up the Aramco valuation, according to a third source close to the IPO.

"$60 is a sweet spot. But now they are making hay while the sun shines," the source said.

He added however that, inside Aramco, concerns were also rising that a prolonged rally could again spur U.S. shale production too much and lead to a loss of Saudi market share.

"A rally to the $70s carries the seeds of its own destruction," the source said.

(Additional reporting by Alex Lawler and Rania El Gamal; Writing by Dmitry Zhdannikov; Editing by Pravin Char)


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