Saudi Arabia’s failure to keep oil production down may severely hamper the sale of shares in Aramco according to industry analysts. Experts believe that only a $60 barrel can save the Aramco IPO, which is significantly higher than the current trading cost of $47.78 a barrel.
A combination of failures to reduce oil production and a rise in US shale has kept oil prices at a significantly low level.
The Kingdom has placed its hope on the sale of five per cent of its most prized asset, Saudi Aramco. But, Business Insider says that the royal family – especially newly crowned heir to the throne Mohammed Bin Salman – needs oil prices near $60 for Saudi Aramco’s 2018 IPO to generate the income it needs for its vision to drastically reduce the country’s reliance on oil, develop new sectors and bring “Saudi Arabia into the 21st century”.
It’s believed that Riyadh is behind in its preparation for sales of Aramco, which is expected to be the largest IPO in history. Low oil prices are thought to be a reason for the delay.
While Riyadh mulls over the most ideal stock exchange to list Aramco, which experts say is between London and New York, the ongoing class action lawsuit against Saudi Arabia through the Justice Against State Sponsors of Terrorism Act (JASTA) is said to be a thorn as it exposes Aramco and its assets to litigation.