EMEA News
Aramco IPO and Other Factors Will Cap Crude at $60/bbl "For Many Years into the Future"
Saudi Arabia's highly-anticipated IPO of state-owned Saudi Aramco may help the Kingdom diversify its economy as planned, but if it goes ahead it could stunt crude price growth, according to Dennis Gartman, editor and publisher of The Gartman Letter.
Gartman told CNBC that if or when the IPO gets underway (recent reports have suggested it may be delayed into 2019 or even shelved) it could be "very difficult" for West Texas Intermediate to break $55 per barrel and "tough" to push Brent crude past $60 per barrel.
He remarked, "Yes, the IPO when it comes it is a long way away, it's the next half of next year but I think that probably shall mark a very important high for the crude oil market for many years into the future."
Gartman added, "If you want to own oil in some manner, own the refiners; I think that's a better trade."
As far as Amin Nasser, CEO of Aramco, is concerned, that scenario will play out sooner than later: he told CNBC that the IPO is on track to get underway next year.
He said, "We have always said that we will be listing in 2018, and to be more specific, in the second half of 2018.
"The IPO is on track; the listing venue will be discussed and shared in due course."
Another respected insider offered a variation of Gartman's theme: Olivier Jakob, managing director at Petromatrix, told media, "It's going to be difficult to really break $60 a barrel, without some major new event, and if we do break $60, it's going to be even more difficult to sustain it."
More predictions that crude will remain essentially range bound came from Leon Black, chief executive officer for Apollo Global Management LLC, who on Wednesday said he expects prices to stabilize between $55 and $60 in the near term.
He remarked with regards to his firm having plated oil price volatility "opportunistically," "We are living in a strange world with lot of geopolitical volatility, but it's not in financial markets."
Another factor that promises to keep crude prices down is the resourcefulness of the majors: recently Royal Dutch Shell stated it is confident it can pump oil from Brazil's traditionally very expensive-to-extract pre-salt oilfields below the company's target breakeven cost of $40 per barrel.
Wael Sawan, executive vice president for Shell's deepwater division, said, "We are well advanced on the design on testing where the market is and ultimately the decision point is going to come in 2018 whether yay or nay."
Experts have cited numerous reasons why crude will remain range bound, one of them being the Organization of the Petroleum Exporting Countries: they argue that another extension of its crude production cutback initiative at the same cutback rate means a bearish future for oil.
