2020-05-12 • Updated
Since its IPO in December 2019, Saudi Aramco’s stock price has been consistently declining. Before the New Year, it traded at $35. But in the second week of March, it was down to $27. After plunging to those levels, it gradually got back to the previously marked descending trajectory. That is how it got to $31 per share and seems well balanced at this level. What’s the status now?
While competitors such as Exxon freeze their dividends payout, some for the first time in decades, Saudi Aramco cannot afford to do the same. It stays committed to keeping the dividends coming as these have been the main attraction for investors to hold stock in this company – and investors, 98% of whom are Saudi nationals, are now going through one of the toughest financial periods in decades for the Kingdom. People need these dividends; the company needs these dividends. Therefore, Saudi Aramco will fight fiercely to ensure oil prices are high enough to generate them. That may explain the recent decision the company made announcing it would cut the output to 7.5mln of barrels in June – that’s after it was so adamant to keep pumping up to 13mln when the price war with Russia was on a month ago. Partly, that’s exactly what putting bottom to oil prices means in OPEC+ discussions: Saudi Arabia is bound to back it up because it depends on it.
Excluding the single drop into the negative zone in the middle of April, the base for the WTI price movement in April was $10: that’s when the price was already over, but the oil glut has become more and more apparent. Since the beginning of May, when the first reports about the glut diminishing started appearing in the media, the price started climbing back. Eventually, it established itself a new base at $25 per barrel (for Brent it is at $30). At this level, it went into consolidation, which very likely will keep going during the month until the glut is finally dissolved. We know for a fact that Saudi Aramco wants to make sure there is no going below the current price level, and the support of $20 will be checking that commitment. When we see the price crossing $29, that would mean Saudi Aramco is getting back to financial capacity.
Saudi Aramco stock price depends on the dividends. If they keep coming, the price per share may stay at $30. If not, the downtrend is likely to continue.
The most interesting question is whether and when the stock price will start climbing. That will be largely defined by the global oil demand when the glut it over, by Saudi Aramco’s financial reports, which will definitely reflect the stronger hit in Q2 2020, and by the strategic perspective for Saudi Arabia.
Crude oil futures surged on Monday due to disruptions in Russian refining capacity caused by Ukrainian drone strikes and Moscow's decision to cut output to comply with OPEC+ targets. The West Texas Intermediate (WTI) contract for May settled at $81.95 a barrel, up $1.32, while the Brent contract for May settled at $86.57 a barrel, also up $1.32. Russia instructed...
Bearish scenario: Sales below 80.00 with TP1: 79.60... Anticipated bullish scenario: Intraday purchases above 80.70 with TP: 81.50...
Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...
Jerome H. Powell, the Federal Reserve chair, stated that the central bank can afford to be patient in deciding when to cut interest rates, citing easing inflation and stable economic growth. Powell emphasized the Fed's independence from political influences, particularly relevant as the election season nears. The Fed had raised interest rates to 5.3 ...
Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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