Can the biggest IPO in history set the trend for Crude Oil?

02:31, 16 December 2019

Saudi Aramco, the world’s biggest oil company, ended trading on Monday with a market value of over $2 trillion. Shares closed at 38 riyals (approx. $10.13), giving the company a valuation of $2.03 trillion on Tadawul, the Saudi Stock Exchange. This means that they now stand almost $1 trillion higher than giants such as Microsoft or Apple.

Analysts believe this might be a good omen for the energy markets, and it will be interesting how things will unfold next.

Saudi Aramco’s public debut, the largest on record


In its public debut on the Saudi stock exchange, Aramco listed 1.5% of its shares and quickly became the largest IPO in the world. Previously, Alibaba was holding this spot, with a $25 billion raised when it went public in September 2014.

The IPO was more than four times oversubscribed in a deal backed by local and regional funds, plus retail investors and major financial institutions.

Saudi Aramco’s listing, part of a bigger plan

Saudi Aramco’s listing is part of Crown Prince Mohammed bin Salman’s Vision 2030 program. This project aims to transform the Saudi economy by developing services such as education, infrastructure, or tourism. Part of the funds raised from the IPO would be invested in Vision 2030.


Good news for the energy markets comes from OPEC

Earlier this December, OPEC+ agreed on a new production cut this month in Vienna. The largest petroleum organization decided to shave off 1,7 million bpd for next year (500,000 extra from the previous deal). Also, Saudi Arabia added another 400,000 bpd to the cuts, hoping that other member countries will follow in its footsteps.

The agreement comes into effect from January, with OPEC+ meeting again in March to further discuss the matter.

Oil prices surged almost immediately after OPEC+ decision. On Friday Dec.6, during mid-day trading, Crude oil prices almost hit $60 per barrel, while Brent prices moved very close to $65, their most significant gains in months.

As for the impact on Saudi Aramco, OPEC’s decision provided a much-needed boost on the company’s overall performance on the stock exchange.

Conclusion


2020 appears to be a promising year for Crude Oil and for the energy markets in general. Saudi Aramco, the most profitable company in the world (according to Bloomberg), is having a highly successful IPO launch, while OPEC is doing its best to provide support to Crude with its latest measures. On top of everything, there are stronger signs of a trade war resolution between China and the US.

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Sources: cnn.com, cnbc.com, marketwatch.com, nytimes.com, oilprice.com, 

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