In this interview given to Cyba Audi from Asharq Business Bloomberg, Dr Carole Nakhle, CEO of Crystol Energy, comments on the televised remarks of the Saudi Crown Prince that the Kingdom is in talks to sell 1% of Aramco to a foreign partner.
While there could be a political driver, there is a strong economic rationale behind such an announcement. When Saudi Vision 2030 was announced, talks were about a possible selling of 5% of Aramco though a smaller share was subsequently sold. The Crown prince didn’t only mention that the talks are with a giant foreign energy company, but he also hinted that the company is headquartered in a country that will ensure the selling of Saudi crude oil and products. This statement will help us to narrow down the pool of potential partners with China, the bigger importer of Saudi oil, being the most obvious partner. In this respect, Saudi Arabia is trying to secure its demand and China its supply.
Despite the Biden administration pursuing a tough policy towards China, China is an important market for US crude oil and gas. Competition is likely to be between Saudi Arabia and the US.
Dr Nakhle further discusses the cancellation of the meeting of the Joint Ministerial Monitoring Committee and the decision of OPEC+ to still be moving forward with the previous decisions, which didn’t come as a surprise, as market fundamentals have not changed significantly. The spread of COVID-19 in India is concerning but to put things into perspective, India is the 5th largest economy worldwide however alone it accounts for roughly 3% of the global economy. By comparison, the US and China (the biggest two economies) account for nearly 40% of global GDP and their economies are racing ahead thanks to the swift roll-out of vaccination and government support. They now have a better grasp on the trajectory of the pandemic which will have a positive spillover effect on the global economy.
OPEC+ will continue to monitor the oil market closely but the overall direction is towards a recovery. The pandemic will still impose the biggest risk, and the inequality in economic recovery will persist as long there is an uneven distribution in vaccination.
It is also worth mentioning that, currently, oil prices are trading at comfortable levels for both producers and consumers. Higher prices risk derailing economic recovery.
Watch Dr Nakhle's remarks on Saudi Arabia's talks to sell 1% stake in Aramco
Watch Dr Nakhle's remarks on the cancellation of the OPEC+ JMMC meeting
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