Heisenberg Report

World’s Most Profitable Company Starting To Get Annoyed With Pesky Virus

Shares of the world’s most profitable company continue to drift lower, amid pressure on crude prices and generalized worries about possible commodities demand destruction tied to the coronavirus.

When last we checked in on Mohammed Bin Salman’s crown jewel, Saudi Aramco was trading near post-IPO lows. Fast forward two weeks, and the shares have fallen in seven of eight sessions.

Although they would (predictably) rebound after diving more than 1.8% Thursday, the shares traded down to SAR32.60 at one juncture, within shouting distance of the SAR32 IPO price.

As you can see in the bottom pane, Saudi shares more generally are down more than 7% in the weeks since the coronavirus scare kicked into high gear.

Crude has been beset with demand concerns, and Russia’s foot-dragging on whether to support emergency measures aimed at stabilizing the market isn’t helping. Putin hasn’t made a decision yet, spokesman Dmitry Peskov said Thursday. He went on to explain that the Kremlin will make up its mind in a “timely” manner, which is just a diplomatic way of saying that Putin will let OPEC know whether Russia is going to participate whenever he damn well pleases.

Meanwhile, the IEA said global demand for crude will fall this quarter for the first time in more than a decade. To wit, from the report:

Global oil demand has been hit hard by the novel coronavirus (Covid-19) and the widespread shutdown of China’s economy. Demand is now expected to fall by 435 kb/d y-o-y in 1Q20, the first quarterly contraction in more than 10 years. We have cut our 2020 growth forecast by 365 kb/d to 825 kb/d, the lowest since 2011. Lower-than-expected consumption in the OECD trimmed 2019 growth to 885 kb/d.

The coronavirus outbreak has also led us to revise down the outlook for global refinery runs. Chinese crude throughputs for 1Q20 have been cut by 1.1 mb/d and are now expected to contract by 0.5 mb/d year-on-year. As a result, global runs are forecast to expand by just 0.7 mb/d in 2020. The launch of IMO’s new bunker fuel regulations in January boosted simple refining margins based on sweet crudes.

All of this is offsetting supply jitters out of Libya and Iraq. Crude had its worst start to a year since 1991, diving some 16% in January.

China’s oil demand plunged recently by around 3 million barrels/day, amounting to 20% of total consumption, Bloomberg reported late last month.

Through it all, nobody should lose any sleep worrying about Aramco amid the malaise. Suffice to say they’re going to be just fine:

And even if they aren’t, the brunt of the pain will fall on the shoulders of people who could lose a few million and not even know it’s gone missing.

(Market cap and ownership data as of December)

Read more:

What Collapsing Oil Prices Are Saying About The Impact Of The Coronavirus

Crude Shorts Surge 50% As Virus ‘Black Swan’ Pushes Oil To Worst January Since 1991