Saudi Aramco IPO had engineering of all kinds

Saudi Aramco is no plain vanilla IPO

As shares of Saudi Arabia's Aramco begin trading, there are still a lot of questions about the IPO; past, present and future.

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What else does Saudi Arabia have left in its bag of tricks for the oil IPO? After some high-pressure sales tactics, it wasn't able to price shares of Saudi Aramco at the higher end and so it lowered their trading range. Saudi Aramco eventually priced its IPO at 32 riyals, or $8.53, a share. That put its value at $1.7 trillion, not close to the $2 trillion Crown Prince Mohammed Bin Salman had originally envisioned but still enough to make it the biggest IPO of all time, stealing the crown from Alibaba.

SAUDI ARAMCO IPO: BUYER BEWARE

Saudi Aramco started trading on the Saudi stock exchange, known as the Tadawul, on Wednesday, Dec. 11.

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Yet what was even more impressive, the Saudis were able to engineer a historic OPEC-plus-one -- that one being Russia -- production cut. Traders called the production cut the Saudi surprise. The Saudis used their powers of persuasion to navigate the often politically tense atmosphere at OPEC meetings. The Saudis were able to get promises of compliance from production cheaters Russia, Iraq and Nigeria in return for a promise of continued over-compliance.

The result was a 503,000-barrel-per-day oil production cut, widening the total reduction from the cartel to 2.1 million barrels. In real terms, this was an additional 372,000-barrel-a-day cut by OPEC along with an additional 131,000 barrels a day by non-OPEC producers, led by Russia. The result should put in a floor on oil prices and give the Saudis a price lift for oil.

TickerSecurityLastChangeChange %
USOUNITED STATES OIL FUND L.P.12.33+0.04+0.33%

The Saudis have done everything they can to boost oil prices ahead of the launch date. Now the question becomes whether the Saudis are satisfied or if they have any more tricks up their sleeves to boost oil prices. Some traders say yes.

SAUDI ARAMCO IPO AND THE PRINCE IT WILL DEFINE

One thing the Saudis might do is to expect less oil: Traders are speculating that Saudi Arabia may warn customers their oil allocations will be less next month.

So as the Saudi Aramco IPO begins to trade, get ready for another surprise as the Saudis will do what it takes to come out ahead.

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