Saudi Aramco opens 10% down in the stock market on Monday following a massive drop in the global oil prices

OPEC
had a pact with Russia that demanded restriction over the oil supply. On
Friday, the pact fell apart and fueled a downward rally in Saudi Aramco’s
shares. On Sunday, the Saudi state oil company was reported trading below the
IPO (initial public offering) price of 32 riyals. The Tadawul All Share Index
(TASI), on the other hand, recorded a 7.4% decline.

The
downward rally continued aggressively on Monday extending the drop to 10%. At
the time of writing, Aramco is trading at 27 riyals per share that marks an
over 20% decline in 2020 so far.

Aramco
Climbed To 38.70 Riyals Per Share On Its Second Day Of Trading

Aramco’s
grandeur IPO valued it at $1.7 trillion that branded it as the most valuable
company across the globe. On the second after going public,
the Saudi state oil firm surged to 38.70 riyals per share in the stock
market. The volatility, however, faded away with the start of the new year as the
stock continues to present a downward trend.

The
recent outbreak of Coronavirus in China that is rapidly spreading across
borders is expected to further weigh on Aramco’s financial performance as the
outbreak continues to hurt the oil demand and global economy at large.

OPEC
and Russia remained in a pact that was targeted at market support for three
years. Moscow announced its disagreement with deeper production cuts last week
following which OPEC lifted all restrictions from its production as well. Subsequently,
the broken pact saw a significant slump in global oil prices on Friday.  

The
impact was evident in multiple Gulf markets including Dubai’s DFMGI that
dropped 7.4% and Abu Dhabi stock index that was reported 5.8% down on Friday. According
to Marie Salem of Daman Securities, the decline in Aramco’s stock price also
stemmed from the failure
of OPEC’s deal with Russia.

Commodity
Analyst Edward Bell Comments On The Recent Development

Commodity
analyst Edward Bell of Emirates NBD commented on the news and remarked on
Sunday:

“We
expect to see Saudi Arabia, the UAE, and other large producers in OPEC increase
production over the rest of 2020 as they return to a market-share strategy rather
than price targeting.”

Saudi
Arabia currently holds the reputation of OPEC’s de facto leader and is known as
the world’s largest exporter of oil. Due to the low oil prices in the recent
years combined with several austerity measures that were targeted at narrowing
its budget deficit, Saudi Arabia’s economy remained under pressure in the past
few years.

In
terms of dividend, Aramco is seeking $75 billion this year that is at least
five times higher than Apple Inc. In the list of S&P 500 companies, Apple’s
payout is currently the largest.