Saudi Arabia Launches Bond Deal As Oil Spikes Above $50 On Latest Chatter Of Russia, Saudi Output Freeze
Posted by Tyler Durden on October 10, 2016 12:54 pm
Tags: Bond, China, Crude, Deutsche Bank, fixed, goldman sachs, Market Conditions, Morgan Stanley, OPEC, ratings, Reuters, Saudi Arabia, Turkey, Vladimir Putin
Categories: Bond China Crude Deutsche Bank Economy fixed goldman sachs Market Conditions Morgan Stanley OPEC ratings Reuters Saudi Arabia Turkey Vladimir Putin
Oil prices are rebounding from their Friday drop as first the Saudis, then Russia dropped more hints at the potential for maybe, possibly, kinda, sorta considering an output freeze…
As Bloomberg reports, Russia, the world’s largest energy exporter, is willing to consider freezing or even cutting oil output in cooperation with OPEC, said President Vladimir Putin.
Speaking at the World Energy Congress in Istanbul Monday, Putin said he hoped OPEC would agree on limits to its crude production in November and that Russia was ready to support that decision. Russia will continue to be a reliable energy supplier, he said.
Ministers from some of the largest oil-producing nations are gathering in Turkey this week to discuss ways to end a two-year supply glut. With benchmark Brent crude trading at about $52 a barrel — less than half its price in mid-2014 — countries from Saudi Arabia to Russia remain under severe economic pressure. Last month in Algiers, the Organization of Petroleum Exporting Countries reversed its policy of pumping without constraints, helping boost prices.
“It is not unthinkable that we could see $60 by year-end” following the agreement in the Algerian capital, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in Istanbul.
Even so, a lot of work needs to be done by the next OPEC meeting on Nov. 30, with crucial details still to be resolved on how the burden of cuts will be shared, or whether producers outside the group including will cooperate. Russia would prefer to freeze its output at current record levels rather than make cuts, Energy Minister Alexander Novak said earlier Monday.
Russia has pumped 11.2 million barrels a day of oil so far in October, beating last month’s post-Soviet record of 11.1 million, according to preliminary data from the Energy Ministry’s CDU-TEK unit.
And the resultant short-squeeze jawboning-driven shenanigans.
The spike takes place just as Bloomberg reports that the Saudis are launching a bond deal on October 12 , noting that Saudi Arabia mandates Citi, HSBC and JPMorgan as joint global coordinators to organize a series of fixed income investor meetings.
- Bank of China, BNP Paribas, Deutsche Bank, Goldman Sachs, Morgan Stanley, MUFG, NCB Capital also to help the process
- Subject to market conditions, a debut Rule 144A/Reg S Senior Unsecured USD benchmark offering across 5-, 10- and 30-year maturities under the kingdom’s GMTN program will follow
- Roadshow Schedule
- Wednesday, 12th Oct: London full day
- Thursday, 13th Oct: London morning
- Friday, 14th Oct: Los Angeles
- Monday, 17th Oct: Boston
- Tuesday, 18th Oct: New York
Incidentally, both the latest jawboning higher, and the oil deal roadshow follow just days after S&P affirmed the Saudi A-/A-2 ratings.
- S&P – Ratings on Saudi Arabia affirmed at ‘A-/A-2’; Outlook stable
- S&P – Expect Saudi Arabia’s external and government balance sheet positions will remain strong over 2016-2019
- S&P – Over the next three years, we expect Saudi Arabia will finance its deficits by drawing down fiscal assets and issuing debt
- S&P on Saudi Arabia – Stable outlook based on expectation that authorities will take steps to prevent any deterioration in government’s fiscal position Source text
Bottom line: the oil spike will continue at least until the Saudi deal is successfully priced, and as even Reuters correctly notes that “both OPEC and Russia have clearly realized that talk alone can push crude prices higher by as much as $6-$7 a barrel” according to Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
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