EMEA News
Saudis Either Fearful of Oil's Future or Don't Have As Much Of It As Everyone Thinks: Analyst
Saudi Arabia may be relentless in its bid to keep U.S. players at bay and remain dominant as a global oil producer, but Matthew Weatherly-White, founder of the Caprock Group, believes it is acting on the belief that the value of the commodity it is famous for may decline considerably in the foreseeable future, media reports.
Specifically, Weatherly-White told Yahoo Finance that the Saudis are selling a piece of Saudi Arabian Oil Co., also known as Saudi Aramco, because international climate change initiatives and the probability that carbon pricing mechanisms may emerge within a decade have caused them to "take some chips off the table.
"They're saying....we've got this $2-trillion asset we're sitting on, it's possible it might be worth less in the future either because of the stroke of a regulator's pen or because the market deems the asset to be worth less than it is right now, and we're just going to leak 5 percent of it into the public market."
The Saudis announced their plan to offer Aramco shares in April, in a bid to raise cash that can be reinvested to diversify their oil-dependent economy.
In assessing the Saudi sales strategy, Weatherly-White added that "Even more dramatically, there might be stranded carbon assets they own, and by that I mean assets that are simply worth nothing."
The Caprock founder did not rule out the possibility that the Saudis alternatively could be sitting on less oil than is commonly thought and trying to sell before the truth is discovered, or that their skirmishes with bordering states and the lifestyle of their royals have forced them to bolster their rapidly-depleting reserves.
Saudi Arabia last month made it to Geopolitical Futures' list of the 10 countries worst hit by the global export crisis, and forecaster George Friedman said its bid to sell a portion of Saudi Aramco "gives us a sense of how badly the regime needs cash."
