Market rules ready for Aramco listing ‘by end of June’

Saudi Aramco’s Khurais oil processing facility, 160 km east of the capital Riyadh. The Kingdom has been overhauling its stock market rules to prepare for the local listing of state-owned Aramco. (AFP)
Updated 30 March 2018

Market rules ready for Aramco listing ‘by end of June’

NEW YORK: Saudi Arabia expects to unveil by the end of June rules to prevent large share price drops in newly-listed companies, the final regulatory step for the listing of oil giant Saudi Aramco, the head of the kingdom’s stock market regulator said.

The mechanism, known as price stabilization, is common on developed markets and allows underwriters of an initial public offering (IPO) to use some of the company’s stock to bolster its price, should it fall in the days after it starts trading, or the volume of shares changing hands is weak.

The Kingdom has been overhauling its stock market rules to prepare for the local listing of state-owned Aramco, which is hoping to raise $100 billion or more through a 5 percent stake sale later this year.

Saudi authorities have also said they want Aramco, whose IPO is billed as the world’s largest, to have an international listing, although no decision has been made on the location. This listing could be delayed until Aramco starts trading on the Tadawul, as the Saudi stock exchange is known.

The Capital Market Authority (CMA) issued updated rules in the last couple of months covering how securities are sold in the kingdom and how the offer price of an IPO is calculated using the bookbuild method, Mohammed El Kuwaiz, chairman of the market regulator, told a media event in New York late Wednesday.

“Once (the price stabilization guideline) is issued, we can then say that the Saudi market will be fully amenable to accommodate an offering of the size of Saudi Aramco, or indeed of any size,” he said.

Speaking to Reuters on the sidelines of the event, El Kuwaiz said drafting of the regulation was at “an advanced stage,” and it will be issued before the end of the first half of the year.

The CMA was also expecting to start work by the end of the year on rules governing dual-listings on the Saudi stock market that would be sent out for market feedback early in 2019, El Kuwaiz said.

The timetable could be brought forward if a company approached it wanting to list on another market, he added.


WEEKLY ENERGY RECAP: Keeping things in balance

Updated 08 December 2019

WEEKLY ENERGY RECAP: Keeping things in balance

  • The over-compliance will result in cuts of 1.7 million bpd

Brent crude rose above $64 per barrel after OPEC+ producers unanimously agreed to deepen output cuts by 503,000 barrels per day (bpd) to a total 1.7 million bpd till the end of the first quarter of 2020.

The breakdown is that OPEC producers are due to cut 372,000 bpd and non-OPEC producers to cut 131,000 bpd.

Current market dynamics led to this decision as oil price-positive news outweighed more bearish developments in the US-China trade narrative that has weighed on oil prices throughout the year, with US crude exports rising to a record 3.4 million bpd in October versus 3.1 million bpd in September.

OPEC November crude oil output levels at 29.8 million bpd show that producers were already overcomplying with its current 1.2 million bpd output cuts deal by around 400,000 bpd. 

The over-compliance will result in cuts of 1.7 million bpd, especially when Saudi Arabia continues to voluntarily cut more than its share.

This makes the agreed 1.7 million bpd output cuts pragmatic since it won’t taken any barrels out of the market.

It isn’t a matter of OPEC making room in the market for other additional supplies from non-OPEC sources, as OPEC barrels can’t be easily replaced.

Instead, this is about avoiding any oversupply that might damage the global supply-demand balance.

Saudi energy minister Prince Abdulaziz bin Salman has effectively kept his promise and managed to smoothly forge a consensus among OPEC and non-OPEC producers.

He has also successfully managed the 24-country coalition of OPEC+ including Russia in reaching an agreement.

Despite suggestions otherwise in recent coverage of the Vienna meeting, the deeper cuts announced on Friday have nothing to do with the Aramco IPO. Let’s remember this meeting was scheduled six months ago and the IPO has been in the works for much longer.

The Aramco share sale did not target a specific oil price. If that was a motivating factor it could easily have chosen another time.