CommoditiesCommodities ForecastCommodities PremiumCrude Oil ForecastCrude Oil Technical AnalysisCrude Oil Trade Ideas PremiumForecastsHarmonic Patterns PremiumPremiumTechnical Analysis

Crude Oil Forecast: Lack of Demand vs ARAMCO IPO

Can Aramco IPO help Oil Prices?

Crude Oil Forecast: Lack of Demand vs ARAMCO IPO

Can Aramco IPO help Oil Prices?

I will try to keep it simple as much as I can:

Let us start with fundamentals:

LACK OF GLOBAL OIL DEMAND
  1. Global Oil demand is decreasing. OPEC and IEA lowered their global oil demand forecasts.
  2. WTO and IMF lowered their global growth forecasts.
  3. US-China trade war adds weight on oil prices.
ARAMCO IPO: How can it impact on the Oil Prices.

Oil prices increased more than 3% with the news that Saudi Arabia is working to have its state oil giant Saudi Aramco list on a stock market as early as at the beginning of 2020, The Wall Street Journal reported on Friday, quoting people close to the talks.

Saudi Aramco, the world’s largest oil company, will hold a public investor-relations call on Monday. Aramco IPO will not be easy. There are questions to be answered in any case.

Saudi Crown Prince Mohammed Bin Salman is insisting on a $2 trillion valuation of oil firm Aramco, even though some bankers and company insiders say the kingdom should trim its target to around $1.5 trillion, industry and banking sources said.

A key factor in an oil company’s value is the expected oil price. Producers including Saudi Arabia, its OPEC colleagues and non-members like Russia have struggled to prop up the market this year by a supply-limiting pact, due to slowing demand and rising supplies from the United States and other producers.

Reuters: 

This year’s bond sale forced Aramco to disclose its financials, revealing a colossal net income of $111 billion, over a third bigger than the combined net income of the five supermajors Exxon Mobil (XOM.N), Royal Dutch/Shell (RDSa.AS), BP (BP.L), Chevron (CVX.N) and Total (TOTF.PA).

Even with such profits, one bank pitching for a role in a renewed listing plan has put Aramco’s value at $1.4-$1.5 trillion including SABIC, a source familiar with the matter said. The source close to Aramco described that as a more realistic valuation.

Oil and gas companies are struggling to attract investor interest due to a weaker outlook for oil and deepening climate activism. The S&P Energy sector.SPNY is up 2 per cent so far this year, underperforming the broader market.SPX which is 15 per cent higher.

Even at $1.5 trillion, Aramco would be worth at least 50 per cent more than the world’s most valuable companies – Microsoft with around $1 trillion, Apple and Amazon at around $900 billion each.

Conclusion:

Near term, ARAMCO IPO talks may send prices higher. Because the Saudi Family would do  “whatever it takes” as noted in Bloomberg. But we know those “whatever it takes” actions could never help a sustainable oil rally.

Another issue which is worth to keep in mind is that cutting supply further into a weakening market could leave Saudi Arabia with lower market share and not necessarily much extra revenue to show for it.

China – Iran Oil Trade:

It is worth to focus on CNBC News:  Brent and WTI price could crash if China buys Iranian oil. Bank of America is warning oil prices could potentially crash by $30 a barrel if China ramps up Iranian crude purchases. The report summarized: Bank of America Merrill Lynch warns the oil price could slip sharply if China buys Iranian oil.
Beijing could undermine Washington’s foreign policy stance by ignoring U.S. sanctions placed on Iran.

My Forecast:

Medium Term: Sideways trading between 50 $ – 60 $. The upside is limited by 60.90$. Daily Closings below 50$ would start afresh sell-off.

Long Term: 27 $ – 40 $

Near Term Technical Overview:

After hitting our near term target 50.78$, Crude Oil prices recovered. This recovery was triggered by the ARAMCO IPO news.

As I posted on the channel, Bearish Bat pattern became validated at 54.83. 53.90, 53.60 and 53.13 are our targets. We need to see H4 closings below 53.13 to speak about bearish continuation.

On the upside, the key resistance level is 56.25. A firm closing above 54.83 would lead the prices towards 56.25 and 57.20.

This week is likely to have volatility due to ARAMCO IPO news.

Now we focus on Bearish Bat pattern and its targets. I will update according to the market’s reaction.

VIEW THE FREE CHARTS

VERIFIED ACCOUNT AND SETUP RESULTS

Subscribe to our premium packages if you would like to get 1000+ instruments analysis and trade signals of Chartreadreadepro.

CURRENCIES FORECAST   COMMODITIES FORECASTS   PATTERN SETUP    NEWS  SUBSCRIBE

Discord Channel

You can contact us via Skype User Name: Chartreaderpro

DISCLAIMER: This is a technical analysis study, not advice or recommendation to invest money

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility

 

 

Tags
Show More

Ercu Kartas

Treasury Department Dealer Technical Analyst FX Trader

Related Articles

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Close