Saudi Aramco ‘explores supply cuts to meet OPEC target’

Saudi Aramco is reportedly approaching all its customers for possible cuts from February.
Updated 06 January 2017
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Saudi Aramco ‘explores supply cuts to meet OPEC target’

LONDON: Saudi Aramco has started talks with customers globally to discuss possible cuts of 3 percent to 7 percent in February crude loadings as it moves to implement an agreement on curbing global oil output, sources said on Thursday.
The Organization of the Petroleum Exporting Countries (OPEC) agreed in late November to cut production in the first half of 2017 to reduce global oversupply and prop up prices.
“Aramco is approaching all its customers for possible cuts from February and discussing likely (supply) scenarios,” one of the sources said. “Nothing is confirmed yet,” he said, adding that the scenarios were for 3 percent to 7 percent cuts.
Aramco did not immediately comment.
Under the deal, Saudi Arabia agreed to cut output by 486,000 barrels per day (bpd), or 4.61 percent of its October production of 10.544 million bpd.
Energy, Industries and Mineral Resources Minister Khalid Al-Falih said last month that January oil production could fall below the Kingdom’s agreed ceiling.
“We have done a very high reduction to Saudi Aramco’s customers in Europe and the US, and some customers in Asia, which will bring the Kingdom’s production below the agreed upon ceiling,” he said.
Saudi Aramco will be receiving nominations for February crude supplies from its customers and is assessing which grades it could cut, a second source said.
Saudi oil buyers will be notified by Jan. 10 of their respective crude allocations for February.
“Saudi Arabia, out of OPEC (members), is the country where we should expect the most compliance (to the OPEC agreement). In a sense, it is a confirmation that they are doing what they said they will do,” Petromatrix oil strategist Olivier Jakob said.
Saudi Arabia’s crude output fell from a revised 10.60 million bpd in November to 10.45 million bpd in December, according to a Reuters survey of OPEC production.
“Exports are down markedly from a massive November number,” said one source who tracks Saudi output.
“The bottom line is December is down from November with regard to supply to market.”
Aramco raised the official selling price (OSP) for most of the crude grades it sells to Asia and the US, but cut prices to Europe.
The price of Arab Light crude for Asian customers rose by $0.60 a barrel compared with January to $0.15 a barrel below the Oman/Dubai average.
Traders in Asia said the price hikes were slightly more than expected, and coming on the back of supply cuts in February.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.