Saudi Arabia ambitious for $80 oil

London’s benchmark Brent crude futures rose as much as 2.3% to $70.21 a barrel

Saudi Arabia wants to get oil prices near $80 (Dh294) a barrel to pay for the government’s crowded policy agenda and support the valuation of state energy giant Aramco before an initial public offering.

In conversations with Opec delegates and oil market participants, Saudi officials had been careful to avoid pinpointing an exact price target. Yet people who have spoken to them said the inescapable conclusion from the conversations was that Riyadh is aiming for $80.

The private discussions, relayed by several people who met the Saudis over the last month and asked not to be named, chimes with the tone in public from Saudi officials.

Oil extended gains. London’s benchmark Brent crude futures rose as much as 2.3 per cent to $70.21 a barrel.

In an interview with Time magazine last week, Saudi Crown Prince Mohammad Bin Salman made the first public statement linking his expectation of higher oil prices with the timing of the initial public offering of Saudi Aramco.

“We believe oil prices will get higher in this year and also get higher in 2019, so we are trying to pick the right time,” he told the magazine in reference to the IPO. Riyadh, which initially targeted the second half of 2018 for the listing, is now aiming for next year.

Cutting Inventories

Saudi Oil Minister Khalid Al Falih has also suggested that Opec should keep tightening the oil market even through the body is close to meeting its goal of cutting crude inventories in industrialised countries back to their five-year average.

In an interview in New York last month, he said today’s price near $70 a barrel hadn’t been sufficient to stimulate investment in the industry, which remains significantly below levels seen before 2014’s price crash.