Oil price: OPEC split into two camps

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Within OPEC was divided into two camps. On the one hand there is Saudi Arabia, which wants oil cost at least $70 per barrel. On the other hand, Iran, which insists on the value of black gold at around $60 per barrel. The controversy caused by their disagreement on how the price will affect the production of shale oil in the United States, according to The Wall Street Journal.
The situation does not seem surprising: Iran in order to balance the budget, enough oil was only $57,2 per barrel. At the same time, Saudi Arabia needs about $70 per barrel to cover government spending record in 2018. Concern about the shale oil probably will be a major topic at the next meeting of OPEC members in Vienna in June 2018.
There is another big news. The IPO of the state oil company of Saudi Arabia Saudi Arabian Oil Co. (Saudi Aramco) is likely to occur only in 2019. It is reported by The New York Times, citing three sources familiar with the plans of the company. Previously, Saudi Aramco has announced that it will place its shares on the Saudi stock exchange Tadawul, and one to two international venues. There were also speculation about a possible sale of shares to a sovereign wealth Fund, perhaps Chinese.
Evil tongues say that after the dispossession the end of last year, the Saudi oligarchs budget of the Kingdom has already not need the money. Analysts of the financial companies argue that the Saudis have problems with transparency: not all information that should be disclosed during IPO can appeal to the market. First of all, it concerns the volume of oil reserves. Financial theory says that stock size defines up to 80% of the oil company.
Recall that the Saudis appreciated Saudi Aramco in $2 trillion. and the capitalization of the offered shares is $100 billion. in addition, investors like efficiency, cost control, profitability and other important metrics. After the recent drop in oil prices, leading oil companies, including Russian “Rosneft”, “Surgutneftegaz” and “LUKOIL”, held optimization of business, have implemented programs to reduce costs. The market doubts that similar steps have been taken in the oil company Arab Kingdom, seeing how Saudi Aramco is not a market structure.
Some investors believed that by buying securities of the Saudis, they can Finance international terrorism and, consequently, try to refrain from such questionable from the moral point of view of investment. Probably fashionable now investing in the marijuana and the sex industry, which often generate good income, from the point of view of morality and of Western Christianity better. Global investors, as always, is very selective conscience take in.
Of course, the transfer of the IPO Saudi Aramco for the year 2019 – this is bad news for speculators from emerging markets in General and investors interested in shares of Russian oil and gas holdings in particular. This is especially true of “Gazprom”, to a lesser extent, “LUKOIL” and “Rosneft”. Many speculators bet that the Saudis this year sell paper expensive, and a new level of assessment will lead to re-evaluation, that is, to the explosive growth of quotations of their shares. Now the IPO is postponed for a year, and not the fact that it is generally held. Have to pay loans, and even them have to pay interest.
Russia itself is not so important whether the oil traded for $60 or $70 per barrel. Both prices of the black gold give a guarantee of financial shocks: there will be problems with the budget and the ruble. The key rate of the Central Bank of the Russian Federation, probably, at the end of 2018 will be 6.5%. She is now at 7.5%. However, the economic growth rate by 2018 is likely to account for less than 2%, which is below average. It’s not surprising. Russia is still under the pressure of sanctions, the corporate sector has been largely cut off from import of technology and capital markets. Economics is the art of the possible, no more and no less.
Alexander Razuvayev,
The Director of analytical Department,