Aramco smashes market record with $100bn orders for new bonds

Aramco will raise $12 billion from the bond sale. (Reuters)
Updated 11 April 2019
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Aramco smashes market record with $100bn orders for new bonds

  • Saudi state oil company will raise $12 billion from debt issue
  • The appetite for Aramco debt was stimulated by a series of “road shows” by the company’s executives and their advisers in the main global financial centers

DUBAI: The Saudi state oil company’s debut on Wednesday on the international capital markets is set to break all records for a bond issue by an emerging market entity.

The Saudi Aramco bond issue attracted more than $100 billion in orders from global investors, the largest ever for emerging market bonds, company sources said on Tuesday.

That easily surpasses the $52 billion for Qatar’s $12 billion deal last year, $67 billion for Saudi Arabia’s own sovereign debt issue in 2016 and $69 billion orders for Argentina’s $16.5 billion trade the same year. 

Aramco will raise $12 billion from the bond sale, split into maturities ranging from three to 30 years. Even before they go on sale, the new bonds were trading up in the “gray market.” “Strong demand in a world looking for extra yield, a new name, and lots of cash,” said Andrew Brenner, managing director of National Alliance Capital Markets.

The appetite for Aramco debt was stimulated by a series of “road shows” by the company’s executives and their advisers in the main global financial centers, and follows publication of the first-ever prospectus to give hard details of the company’s finances and ownership structure.

It will also quieten suggestions that the global financial community had cooled on Saudi Arabia as an investment destination since the murder last year of journalist Jamal Khashoggi.

Khalid Al-Falih, the Kingdom’s energy minister and chairman of Aramco, told a gathering in Riyadh this week that the historic bond would be the beginning of a “permanent presence in capital markets, in bonds, shares and
paper.”

Demand for the bond of more than $100 billion is equal to the amount Aramco expects to raise through international equity markets in an initial public offering on stock exchanges, which has been postponed until 2021.


‘Huge increase’ in crude prices not expected: IEA executive director

Updated 19 July 2019
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‘Huge increase’ in crude prices not expected: IEA executive director

  • The International Energy Agency is revising its 2019 global oil demand growth forecast down to 1.1 million barrels per day
  • IEA’s Fatih Birol: Serious political tensions could impact market dynamics

NEW DELHI: The International Energy Agency (IEA) doesn’t expect oil prices to rise significantly because demand is slowing and there is a glut in global crude markets, its executive director said on Friday.
“Prices are determined by the markets ... If we see the market today, we see that the demand is slowing down considerably,” said IEA’s Fatih Birol, in public comments made during a two-day energy conference in New Delhi.
The IEA is revising its 2019 global oil demand growth forecast down to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Birol told Reuters in an interview on Thursday.
Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd. But in June this year it cut the growth forecast to 1.2 million bpd.
“Substantial amount of oil is coming from the United States, about 1.8 million barrels per day, plus oil from Iraq, Brazil and Libya,” Birol said.
Under normal circumstances, he said, he doesn’t expect a “huge increase” in crude oil prices. But Birol warned serious political tensions could yet impact market dynamics.
Crude oil prices rose nearly 2 percent on Friday after a US Navy ship destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows.
Referring to India, Birol stressed the country could cut its imports, amid rising oil demand in the country, by increasing domestic local oil and gas production.
Prime Minister Narendra Modi had set a target in 2015 to cut India’s dependence on oil imports to two-thirds of consumption by 2022, and half by 2030. But rising demand and low domestic production have pushed imports to 84 percent of total needs in the last five years, government data shows.
Meanwhile, the IEA doesn’t expect a global push toward environmentally friendly electric vehicles can dent crude demand significantly, Birol said, as the main driver of crude demand globally has been petrochemicals, not cars.
He said the impact of a serious electric vehicle adoption push by the Indian government would not be felt immediately.