Aramco is in a downward spiral of crises and losses
The state oil company Aramco has entered a cycle of crises and losses, prompting it to abandon the decision to sell a new stake to foreigners with the collapse of oil prices due to the ongoing oil war between the Kingdom and Russia.
According to the newspaper, a number of officials in the oil sector stressed the difficulty of understanding the logic behind the Saudi decision to flood the oil market, especially as it comes against the background of low demand by the world’s largest oil importer, that is, China, due to the outbreak of the Coronavirus in it.
Analysts and officials in the oil sector, according to the newspaper, warned that the Kingdom’s struggle for dominance in oil markets could allow it to increase its share in global markets at the expense of Russia and US competitors, but that the price of this “price war” may be above what Saudi Arabia can afford it.
In the morning trading, oil prices fell for the second day in a row on Thursday, in light of a general decline in global markets, after the United States imposed a travel ban from Europe, after the World Health Organization decided to declare the outbreak of the Coronavirus as an epidemic.
The drop in oil has exacerbated the risk of a flood of cheap supplies as the Kingdom pledged to increase production to a record level in its confrontation with Russia.
Brent crude fell as low as $1.65, or 4.6 percent, to $34.14 a barrel, which is slightly more than the low levels reached earlier.
Brent crude contract fell about 4 percent on Wednesday. US crude fell 1.38 dollars, or 4.2 percent, to 31.60 dollars a barrel, after falling by 4 percent in the previous session.
Aramco shares lost $80 billion of its market value in the beginning of trading on the Saudi Stock Exchange, today, driven by a decline in crude oil prices globally.
Aramco shares fell, by 4.9 percent in the beginning of trading, with the price of oil futures contracts in the beginning of trading Thursday, by 4 percent, driven by US restrictions on the traffic coming from European countries.
Aramco shares fell to 28.20 riyals ($7.52), compared to Wednesday’s close of 29.7 riyals ($7.92).
The shares of the Saudi company, classified as the largest oil company in the world, witnessed sharp fluctuations during the trading this week, driven by the decline and rise of international crude oil prices.
With this drop, the company’s market value fell to 5.64 trillion riyals ($1.504 trillion), down from 5.94 trillion riyals ($1.584 trillion) at Wednesday’s close.
Aramco has offered 1.5 percent of its shares in the local stock market, i.e. 3 billion shares, of which 0.5 percent is for individuals (one billion shares) and one percent for institutions.
The Saudi index fell three percent. Saudi Aramco shares fell 2.4% as oil prices tumbled, also affected by the risk of a flood of cheap crude flowing to the market as Saudi Arabia pledged to increase production.
Aramco shares closed at 29 riyals, down 10.3% from its initial public offering price of 32 riyals and a loss of 17.3% since the beginning of the year. Al-Rajhi Bank shares fell 1.5% and Makkah for Reconstruction and Development 4.2% after it announced lower annual profits.