09 Mar 2020; MEMO: Saudi Aramco shares fell ten per cent this morning after Saudi Arabia slashed its official selling prices for crude and set out plans for a dramatic increase in oil production next month, prompting a sharp drop in prices, Reuters reported.
Shares in Aramco were trading at 27 riyals ($7.20), 15.6 per cent below its initial public offering (IPO) price of 32 riyals, which in December valued the company at $1.7 trillion in the world’s biggest share offering.
Aramco fell below its IPO price yesterday for the first time since trading began in December when the company’s listing was seen as a culmination of years of Crown Prince Mohammed Bin Salman’s efforts to help diversify the economy away from oil.
Saudi Arabia announced its plan to raise its crude oil production above to 10 million barrels per day (bpd) in April, after the collapse of the OPEC supply cut agreement with Russia.
Benchmark Brent crude fell as much as a third following Riyadh’s move.
“The Saudi reaction to the breakdown was to revert to the 2014 playbook. By precipitating an oil price collapse they are looking to end their subsidy of higher cost producers,” said Akber Khan, head of asset management at Al Rayan Investment.
“This is a painful strategy that requires time to play out and failed on the previous attempt.”
Aramco’s stock hit an intraday high of 38.70 riyals on its second day of trading but has eased since then on concerns about the valuation, which had kept international funds away from taking part in the IPO.
