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Why I do not favor ARAMCO Sale ?

June 17, 2017

@asadcmka
Asad Rizvi 

My argument that why Saudi Arabia should delay or cancel its ARAMCO sales is based on analysis of past market behavior, which has political and economic twist too, as oil price collapse in last quarter of 2014 is a good example of oil producers complacent attitude costing them turbulence and economic uncertainty at home.

In past, we have witnessed that oil experts completely ignored/failed to identity the US Shale Oil Revolution, which was purely due to lack of vision, as planners were unable to read or interpret the writing on the wall.

More importantly, oil producers will have to accept/realize the fact that the current global growth pace is not enough to create extraordinary demand for oil.

Furthermore, FED policy makers plan to reduce the size of its $ 4.5 Trillion Balance Sheet in 2017, if the economy remains on track is not good news for Hedge Funds and Oil Traders, as it will squeeze liquidity.

Supply glut is a never ending problem unless oil supply does not exceed demand. Neither unlike past hidden and known Geo Political and Middle Eastern conflict/factor supports the cause anymore.

Whereas, with the passage of time technological advancement in shale, it has sharply increased the Rig Count Due to lower production cost. Some estimates are suggesting cost dropping to or below $ 40 per barrel, which should be taken as oil benchmark price for shale.

To give you another e.g. that how international politics get involved in economics, in a most recent development, US bill to impose new sanctions on Russia is said to benefit America. On passing of bill Germany is furious and accusing USA of its undisclosed plan via energy blockade that will support American natural gas suppliers at the expense of Russians.

Any such blockade will result penalizing of European companies participating in Nord Stream 2 project. Other than Germany, fines will also be imposed on host of European nations such as Austria and France, as after the completion of Nord Stream 2 project pipeline, it will carry Russian gas across the Baltic.

However, this bill is required to obtain US House of Representatives approval and then if Trump signs then the bill it will become a law.

Therefore, to obtain best result, proactive stances are required to counter the hidden agendas that will never come under discussion. I firmly believe that despite other unfavorable factors oil prices will remain under pressure until ARAMCO sale is finalized. This is why I am supporting quick announcement of cancellation or delay of ARAMCO sale until next 5-years.

(Disclaimer applies in my post, which means that the perspective is my personal view. I have made every effort to ensure accuracy of information provided. However, accuracy cannot be guaranteed. This article is strictly for information and not intended for Trade or Business Transaction). 

 

Saudi Arabia should Delay ARAMCO Sale

April 24, 2017

https://asadcmka.wordpress.com/2017/04/24/saudi-arabia-should-delay-aramco-sale/

I fully support Saudi Vision 2030, as basic idea is “Economic Prosperity”. But I have reservations about its public announcement to sell 49 pct stake in ARAMCO in next 10 years.

Despite Shale factor, Aramco selling is the other major cause of lower crude prices to buy its shares at a cheaper price and hence, oil prices will remain under pressure until 5 pct IPO is sold.

In my humble view Saudi government should reconsider its proposal to offload 5% of its stake via IPO in 2018, which is estimated to generate USD 100 Billion. On an average if Oil prices are higher by $ 20 (annually) it will generate nearly USD 75 Billion.

Saudi Arabia should announce delay in selling of ARAMCO stake until further notice or postpone selling until next 5-years and see the magic or else prices will once again dip down to average around USD 40.

(Disclaimer applies in my post, which means that the perspective is my personal view. I have made every effort to ensure accuracy of information provided. However, accuracy cannot be guaranteed. This article is strictly for information and not intended for Trade or Business Transaction). 

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