Saudi Arabia, being the leader of the Organisation Petroleum Exporting Countries (OPEC), is planning additional oil cuts ahead of the much-anticipated Aramco IPO, according to media reports.
Saudi Arabia is leveraging its position as the leader of OPEC to cut supply by 400,000 barrels per day to existing cuts of 1.2 million bpd or 1.2 percent of global supply, ahead of Aramco’s IPO.
According to media reports, Saudi Arabia wants to deliver a positive surprise to the market before Aramco starts selling its shares on the Tadawul.
Russia, on the other hand, who is a non-OPEC member, is against the deeper cuts of global oil supply. Reportedly, Saudi Arabia is working hard to convince Russia to change its mind.
The deal, which will see OPEC maintain the cuts till June 2020, is done to keep global prices from tumbling below $65 a barrel in light of Aramco’s IPO.
Aramco is set to sell 1.5 percent of the company or about 3 billion shares on the Tadawul and raise around $25 billion. Saudi Arabia’s Crown Prince Mohammed Bin Salman was aiming for the coveted $2 trillion valuation for the oil behemoth, but now the kingdom has settled for a valuation somewhere between $1.6 trillion and $1.8 trillion.
Aramco’s IPO is the centerpiece of Crown Prince Mohammed bin Salman’s plans to diversify the Saudi economy and reduce its dependence on oil.
Recently, Aramco officials met with investors and fund managers across the Middle East seeking investment for its IPO, which is expected to be the world’s largest.
Many investors and oil giants from OPEC member countries are expected to invest heavily in Aramco’s share sale.