OPEC cuts extension all about Aramco IPO?

[Kate Turlington + 44]

With Russia and OPEC having agreed to a framework to extend production cuts through 2018, from the Saudi side this must be all about what I think we can now only describe as the floundering Aramco IPO. I really don't think this is going to happen at the end of next year. Or if it does happen, it's not going to be big. But extending the oil production cuts has to continue if there is any chance of this IPO going down. 

[Seleskya + 50]

I read an interesting theory on the OPEC deal extension. It's from a publication that I'm not a big fan of as an investor, but I think the argument is worth considering: 

Long-term supply deficit is coming. OPEC, with its vast amounts of data, understands the implications of how much U.S. shale can grow ... we will see ~700k b/d of [US shale] growth next year compared to 1.4 to 1.6 million b/d of demand growth again in 2018. In addition, if OPEC announced the extension through the end of 2018 at the end of November, the steep backwardation in the oil curve will put further pressure on U.S. shale's servicing cost base.

The lower than prompt future prices also eliminate shale's ability to try and ramp production into a higher oil price environment, all the while OPEC benefits from higher prompt prices. Saudi Aramco's IPO at the end of 2018 also gives incentives for Saudi to push higher investor sentiment today. It needs all the time in the world to flip sentiment.

https://seekingalpha.com/article/4127557-opec-will-extend-production-cuts-end-2018-end-november

 

[Petar + 76]

As we know the budget of both countries, Russia and Saudi Arabia are directly connected to the production and price of oil on the market. Putin's administration is highly conservative in estimates, so the 2018 budget compiled on the basis of an oil price forecast of $ 40 per barrel. All this means unexpected revenue for a Russian state that will be quite certain to be realized. Saudi Arabia is fully dependent on oil sales, as 70 percent of the budget revenue comes from oil. These two oil powers can contentedly rub their hands. Their possible deal on further reduction in oil production means more expensive fuel, higher transport costs, and ultimately a general increase in prices for all products and services around the world. The investors in the capital market are well earning the expected growth of oil value. They are betting on rising prices in the next half a year.

[TomTom + 183]

Can't see why Russia would want to act in Aramco's best interest... the leaders of Russian oil majors aren't happy to cut production at all..

[Pavel + 384]

Last unofficial news: Extending global cuts until the end of 2018 !!!

https://www.reuters.com/article/us-opec-meeting/opec-committee-backs-cut-extension-until-end-2018-with-june-review-idUSKBN1DS14Z?feedType=RSS&feedName=topNews&utm_source=twitter&utm_medium=Social

Even it there was doubt about Russia attitude, everything is clear know... 

[Rodent + 1,424]

2 hours ago, TomTom said:

Can't see why Russia would want to act in Aramco's best interest... the leaders of Russian oil majors aren't happy to cut production at all..

Russia, I think, is happy to exist in the current oil price environment. Keeps US shale from exploding, keeps ruble low. Their budget is set for $40-oil so anything over that is gravy. IF (and that is a pretty big IF) Russia is on board with an extension, it will be shorter than through end-2018 and it will be because of a tit-for-tat deal (heeeellllooo air defense contracts signed earlier this month and billions in energy deals recently signed). 

In the event I am incorrect and Russia goes for broke signing on for an extended extension, then this message will self destruct.

[TomTom + 183]

Even though crude prices fell a bit today, I think Russia will comply... the real new structure of oil markets has already been discussed by Moscow and Riyadh a couple of weeks ago: https://oilprice.com/Geopolitics/International/Vienna-Is-The-Ultimate-OPEC-Smokescreen.html

[Rodent + 1,424]

indeed it is done. Agreement is being signed now