International

Aramco Is First Oil Major to Regain Pre-Price-War Share Price

Published on : 2020-05-20

Bloomberg - Saudi Aramco is the first major global oil producer to see its stock recover to the level it traded at before the price war between Russia and Saudi Arabia.

Aramco climbed 3.1% in Riyadh on Tuesday, advancing for a record sixth day alongside an extended increase in the price of crude. The stock has gained each session since the company announced it would retain dividend payouts, despite a drop in first-quarter profit.

Aramco regains level prior to oil-price war between Saudis and Russians

Aramco’s recovery has been achieved on much smaller share volumes than its international counterparts, with less than 2% of the Saudi company’s stock available for trading. An average of about $35 million worth of Aramco shares changed hands each session last week, rising to $100 million on Monday. That compares with yesterday’s Exxon Mobil Corp. share turnover of $1.4 billion.

Much of Aramco’s stock sold during its initial public offering in December went to locals, who stand to receive bonus shares if they maintain their holdings for six months. The shares are now 20% higher than this year’s lowest close on March 16.

Shares in oil companies plummeted in March after an OPEC+ meeting ended without a deal to curb production, an impasse that was followed by an all-out price war between Saudi Arabia and Russia. The Covid-19 pandemic disrupted global energy demand as economies shut down, prompting a collapse in the oil market. Crude futures have since recovered as governments started to ease lockdown measures and after major suppliers eventually agreed to production cuts.

While Aramco stuck to its dividend plans, Royal Dutch Shell Plc slumped last month after cutting its payout for the first time since the Second World War. Total SA offered to pay part of its final 2019 dividend in shares, rather than cash.

“While oil-output cuts across the world have helped push prices above $30 a barrel, we remain cautious about the pace of a recovery in oil demand and compliance with the OPEC+ pact,” said Bloomberg Intelligence analysts Salih Yilmaz and Rob Barnett. They added that price volatility may persist, “given uncertainty over the relaxation of coronavirus pandemic lockdowns.”

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