Monday 02 December 2019 9:45 am

Saudi Arabia pushing Opec for deeper oil production cuts ahead of Aramco IPO

Saudi Arabia is seeking to push Opec into deepening oil cuts until at least June 2020 as it prepares for December’s listing of Saudi Aramco.

Sources told Reuters that Opec and its allies, including Russia, were currently discussing a deal to add 400,000 barrels per day to existing production cuts of 1.2m barrels per day.

Such a move would ensure oil prices remained high during Aramco’s initial public offering (IPO), which will be priced on 5 December, the same day as the cartel meets in Vienna.

Neil Wilson, chief market analyst for Markets.com, said: “Looming over this meeting of course is the imminent listing of Saudi Aramco. This is naturally going to be the single most important factor for the Saudi lynchpin.

“Indeed, we are not alone in thinking that the entire strategy of production curbs has been with at least one eye on the Aramco IPO. Vladimir Putin described it as an ‘open secret’ in fact. So Saudi Arabia will want unity and a firm decision to cut. It will not want Russia to start to waver.

“There is simply too much at stake for Saudi Arabia now – which could argue in favour of the Saudis shouldering even more of the burden and going for deeper cuts. The key is to bring the others with it in this endeavour.”

Sources also said that the latest analysis from Opec showed that if additional cuts were not made 2020 would bring a large oversupply and a build up in inventories.

Last month the producer group’s secretary-general Mohammed Barkindo had said that the 2020 market had upside potential, appearing to underplay the need for further cuts.

On Thursday the retail tranche of Aramco’s listing closed, with total bids worth 47.4bn riyals (£9.8bn), around 1.5 times the amount of shares offered to them.

The institutional section of the float closes on 4 December, with the price to be announced on 5 December.