Are you planning to trade Saudi Aramco stocks or shares?
With the news of this oil giant going public, interest in investing on this state-owned company has gained momentum and if you don’t want to be left out then you better read this article.
About Saudi Aramco
Saudi Aramco is an integrated oil and gas company that is owned and operated by the Kingdom of Saudi Arabia.
This oil and gas giant powers the kingdom’s economy pumping almost 13% to the global oil market and employs over 76,000 people making it the world's biggest oil company.
And you know what?
It also happens to be one of the most profitable companies in the world!
Aside from being the largest energy producer, it also owns a 260 billion-barrel oil reservoir which is 10 times that of the entire crude oil stockpile in the US which is currently at 24 billion barrels.
Saudi Aramco IPO
For years, Aramco was exclusively owned by the Saudi Government but in 2016, the initial plans for the Arabian oil firm’s initial public offering (IPO) started.
However, because of issues regarding corporate structures and bookkeeping, this has been postponed many times.
How does an IPO work?
An initial public offering or IPO is the process when a company has decided to be listed on a stock exchange.
What does this mean?
IPO’s allow companies to raise capital for expansion from anyone in public who can be a shareholder of the company.
Shareholders then will be able to profit from the IPO by trading (buying or selling) these shares at the stock market.
Here’s what you need to know:
IPOs drum up interest particularly on companies that are highly popular in the market sector.
A timeline of the Saudi Aramco IPO
November 3, 2019
Khalid Al-Dabbagh, the company’s senior VP of finance, announced that Aramco’s IPO was ready and that the scheduling greatly depends on the market perception of its shareholders.
An official announcement was made for its initial public offering in the Saudi Stock Exchange or more locally known as Tadawul, the largest equity market in the Middle East and North Africa (MENA).
November 9, 2019
A 600-page prospectus was issued and this has all the details regarding the IPO which states that up to 0.5 per cent of the company’s shares were allotted for individual retail investors.
November 17, 2019
The oil firm’s share price was announced to be around $8 to $8.52 with 1.5% of its shares offered on the Tadawul.
December 11, 2019
Saudi Aramco has started trading on the Tadawul.
Why is Saudi Aramco going public?
Initially, the decision for the state-owned company to go public was for the purpose of increasing the Public Investment Fund (PIF) which is Saudi Arabia’s sovereign wealth fund.
During this period, the IPO was expected to increase the PIF by over $3 trillion but plans of placing it under the PIF has been scrapped and this meant that the fund no longer requires subsidizing.
Aramco then has decided instead to raise funds for the company’s diversification.
What is Saudi Aramco’s IPO value?
As of this writing, there is no official IPO value yet for Saudi Aramco although the oil giant is assessing setting the final offer price at the top of the indicative range of around 30 to 32 Saudi riyals per share which is equivalent to $8 to $8.52.
With this pricing range, the company could get a valuation of $1.7 trillion!
Such size is set to break the record of having the biggest IPO in history.
Saudi Aramco's potential listing could surpass the $25 billion record that was raised by Chinese retailer Alibaba which made its debut in 2014 and SoftBank Group’s $23.5 billion record in 2018.
What’s the stock price of Saudi Aramco when it floats?
The stock price of Saudi Aramco is relative on two factors: the company’s final valuation and the amount of shares that will be available for the public to buy.
Here’s what you need to know:
The Saudi Arabia government is targeting 5% of its company’s shares while the rest will still be owned by the sovereign state.
Fluctuations on Aramco’s stock price is expected after the IPO and will be greatly dependent on the global market’s supply and demand requirements.
Is Saudi Aramco trading profitable?
Saudi Aramco’s net income continues to rise year over year as the company continues to cut its carbon footprint and reduce costs on oil production.
Saudi Aramco trading
Take a look:
2016: $13.3 billion
2017: $75.9 billion
2018: $110.1 billion
For 2019, the half-year report alone shows that the company already had a revenue of $46.9 billion – way higher than the combined profits of the other 6 largest oil companies in the globe.
They were able to reduce the cost of extracting crude oil to just $7.50 per barrel with overheads costing only $1.50 per barrel.
And here’s the kicker:
It has increased its total volume by 151,000 barrels per day at it has signed new crude oil sales agreements with China for 2020.
Taking all of these facts into consideration…
Making wise trading decisions on Aramco stocks can provide you with substantial yields given that your market predictions are correct and your positions are placed in the money.
What’s the future for Saudi Aramco?
The outlook for Saudi Aramco is mixed, as a few factors should be taken into consideration when forecasting the future of the company.
The outlook for Saudi Aramco for the short- to medium-term will be largely relative on the price of crude oil.
If crude oil prices are going up, then Saudi Aramco’s upcoming IPO is at a perfect timing.
On the other hand, growing fears of a recession and a possible slowdown in the global economy could significantly decrease the demand for this precious commodity.
Global demand for crude oil
This will significantly be influenced by Aramco’s IPO results.
One of the goals in having the company listed is to raise funds which can be reinvested in non-oil sectors and diversify the kingdom’s economy.
And if Aramco is able to achieve this major goal then the outlook will definitely be sunny and bright!
Saudi Arabia flag
Aramco has already acquired a 70% equity stake in Saudi Basic Industries Corporation (SABIC), the world’s third-largest chemical company.
This indicates that the company is bullish in expanding its high-value downstream operations.
Factors affecting Saudi Aramco’s stock market value
With Saudi Aramco being the world’s largest oil company, it is expected that supply and demand from the global energy market can greatly influence its market value.
Should the prices of crude oil go up, the company is likely to ride the wave and post gains.
Crude oil prices
In another scenario…
The possibility of a slowdown in oil demand can result to overproduction and this could greatly affect the company’s revenues.
The volatility of Aramco’s shares may also be affected by any significant political developments since it is still a state-owned oil company.
Their oil fields and refineries are based in the Middle East and any geopolitical tensions in the region could disrupt global energy supplies and upset energy prices.
Saudi Aramco gas and oil fields
Here’s one good example:
The 2019 Abqaiq–Khurais attacks in which drones were used to attack Aramco’s oil processing facilities disrupted Saudi Arabia's global oil production by about 5% and causing oil prices to surge by as much as 20%.
State-owned entities in China are also considering to having stakes of up to $10 billion in the Saudi oil firm. Such investments could also influence the company’s share price.
How can you trade Saudi Aramco shares after its IPO?
After its IPO, you will be able to invest on Saudi Aramco’s stocks via a popular form of derivative called contracts for difference or CFDs.
CFD trading allows you to speculate on the oil firm’s shares and leverage your exposure.
Via a CFD service, you can go long or short (buy or sell) based on how you predict Aramco’s share price is going to move.
And since it is simply a form of speculation in the financial markets, you don’t actually buy or sell the underlying asset in order to trade.
But wait, there’s more…
You will be able to access not only Aramco stocks but also other markets related to this oil and gas giant.
You'll have the liberty to invest on commodity markets such as crude oil, Brent oil and gasoline which also offers plenty of opportunities to trade.
And with many other markets to explore, you will be able to find opportunities that are matched with your trading style.
How to trade Saudi Aramco stocks CFDs?
Trading Aramco stocks CFDs is very simple and you just need to follow a few steps:
- Via your broker’s platform, select the Aramco stock.
- Select Buy or Sell. If you think that Aramco’s price will increase, choose Buy. But if you think its value will fall. Choose Sell.
- Set the trade size and the number of CFDs you want to trade.
- Monitor the market. You will be able to see if you’re making a profit or loss via the platform in real time.
- When the time is right, close the trade. If you have predicted the market correctly, you earn a profit. Otherwise, you incur a loss.
Here’s a tip:
If your broker offers risk management tools, we suggest that you take advantage of them.
One good example is a “stop loss” which is an order that automatically closes your position out at a certain price should it moves too far against you.
You can also set a “limit” order which instructs the platform to close out a trade should the stock’s value hit the price that you set and lock in profits.
Aramco CFD trading for beginners
If you’re a newbie in CFD trading, you need to understand the basics and the process first and one excellent way to do this is by using the demo account that is offered by your broker.
Via a practice account, you will be able to do test trades in risk-free environment using virtual demo funds.
And after you have familiarized yourself with the basics, you can then further develop your knowledge and trading skills by incorporating technical and fundamental analysis using the advanced tools that will be provided by your broker.
Do take note that the availability of such tools and features may vary from broker to broker.
Brokerages offering Aramco stocks
Here’s some good news:
eToro will be adding the Aramco stock CFD on its platform and it will be accessible for traders once proper liquidity is provided.
Saudi Aramco stocks trading with eToro
But take note:
As for now, you will be able to include it already in the Watchlist (similar to favorites) so you will be able to access it easily on the platform by the time that the market is open for trading.
Saudi Aramco stocks on eToro's platform
With a trusted brokerage like eToro, you’ll be able to access updated news and analysis about Aramco from their platform which you can utilize to predict its price movement.
Aramco’s stock price is subject several factors and could experience high volatility in line with the global oil markets in which prices of these precious commodities can have a huge influence on its market value.
That means crude oil, Brent oil, natural gas and other related commodities may react with the movement of Aramco’s stocks and vice versa.
*CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Official Regulated Brokers You Can Trade Aramco With
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66% of retail CFD accounts lose money