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Oil prices taking a breather and so might Aramco’s IPO

Oil is facing tough times ahead, none tougher than making a stable market decision on Saudi Aramco’s initially planned end of 2019 launch. 

Aramco had planned to list 1% shares of the state oil plant on the Riyadh stock exchange before the end of this year and another 1% in 2020, Reuters reported last week.

Based on the indicated $2 trillion valuation that Saudi Aramco had hoped to achieve, a 1% float would be worth $20 billion.

Nothing is now clear. Will the US launch a retaliatory strike on Iranian interests? How will Saudi respond to increased attacks on its strategic oil fields? 

IPO delay?

According to a Reuters and based on a Wall Street Journal report on Monday, Saudi Arabia officials are discussing delaying Aramco’s initial public offering as attacks on the company’s oil facilities have drastically reduced their output, citing people familiar with the matter.

“The company is expected to move forward with presentations to analysts and meetings with bankers as planned. However, Saudi energy officials and Aramco executives are debating a rescheduling of the IPO until after the company fully restores its production to normal levels,” the report indicated as per Reuters.

Saudi is keen to show it can can produce crude reliably, despite increasing security threats.

AMeinfo published analysts’ views on how benchmark Brent, now trading at around $68 a barrel, could hit $100.

Oil Production Update 

On September 14th drones and missiles struck the Abqaiq plant and Khurais oil field, starting huge fires. 

Abqaiq, a crude processing centre south-west of Saudi Aramco’s headquarters in Dhahran, prepares almost 70% of the kingdom’s crude for export.

The Organization of the Petroleum Exporting Countries is assessing the impact but says it is too early for members to take any action on raising production or holding a meeting, the UAE energy minister and other sources said.

According to the Economist, Saudi Aramco said that it had suspended production of 5.7m barrels of crude oil, or roughly 60% of the kingdom’s output and 6% of the world’s oil production. 

Aramco said it would give an update on the extent of the damage in about 48 hours, but a source told Reuters that repairs would take “weeks, not days”.

“In December OPEC+ announced it would cut production by 1.2m barrels a day.

Oil Price today

The price of Brent crude on September 13th, before  last weekend’s attacks, was $60, nearly 20% below the level in late April.

Oil prices surged by as much as 20% in opening trading Monday after the shock attacks.

There is a respite today. 

Brent crude was down 77 cents, or 1.1%, at $68.25 a barrel by 00:51 GMT Tuesday, while West Texas Intermediate was down 82 cents, or 1.3%, at $62.08 a barrel.

The International Energy Agency and the US Department of Energy said they have ample emergency reserves which they could turn to in the event of a prolonged disruption, but analysts said it may not be enough to stop prices spiking first.