Oil rises for a second day as Saudi Arabia pushes supply cut

Oil rises for a second day as Saudi Arabia pushes supply cut

At a time institutional investors are racing to win a stake in the Saudi Aramco IPO, considered the largest offering witnessed by global markets, the Saudi Arabian Monetary Agency (SAMA) said yesterday that the financial situation of banks in the Kingdom is very reassuring in terms of liquidity and lending rates.

In the first update on institutional interest, Samba said the value of bids had reached 118.86 billion riyals ($31.7 billion), with the bulk coming from Saudi companies and funds, while foreign investors accounted for just 10.5% of offers. The remaining shares are allocated for institutional investors, such as banks or sovereign wealth funds.

The bookbuilding process for allocating shares to institutional buyers - typically asset managers, insurers or pension funds - began on November 17 and investors have until December 4 to place orders. It has stayed quiet on when or where it might list the stock overseas, which had been central to the plans that were first announced in 2016.

The oil giant Suadi Aramco recently recorded one of the biggest IPO in history, and the company has managed to raise more than $44 billion of initial capital.

"This is a precautionary measure to assure investors regarding Aramco's impact on the Saudi index in case of any further liquidation in the future or in case the stock price goes up", said Mazen Al Sudairi, head of research at Al Rajhi Capital.

The Saudis are also said to be lobbying other producers to deepen cuts and have been signalling that they are ready to continue taking the biggest burden and to cut well in excess of their target.

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Prices were also supported after Iraq's oil minister said on Sunday that OPEC and allied producers will consider deepening their existing oil output cuts by 400,000 barrels per day (bpd) to 1.6 million bpd.

Monday's rebound in oil prices have gathered steam following the above headlines, as WTI jumps above the 56 handle while Brent regain 61.50.

The much-delayed initial public offering, first announced in 2016, is a cornerstone of Saudi Crown Prince Mohammed bin Salman's ambitious plan to diversify the Gulf state's oil-reliant economy.

The veteran oil official wants to ensure oil prices stay high enough for Aramco's IPO, sources said.

OPEC meets on Thursday in Vienna, with the meeting with its external partners scheduled for Friday.

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