The Landscape Ahead for Oil’s Central Banker
By
Helima Croft
Published February 27, 2020
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1 min read
Helima Croft, Head of Global Commodity Strategy and MENA Research, thinks the listing of Saudi Aramco marks a massive step-change for the Kingdom, and says a lot about Saudi Arabia’s leadership and its future goals for the country.
A Seismic Shift
The IPO of Aramco, regarded as national treasure, represents an important milestone in the Saudi leadership’s plans for economic revolution and is one of centrepiece initiatives of Crown Prince Mohammad bin Salman’s Vision 2030, aimed at diversifying the Saudi economy and generating millions of new jobs for the its young population. The proceeds of the listing will be used to fund this sweeping modernization program, derive more income from investments through vehicles such as the Public Investment Fund, and develop the private sector.
The Central Bank of Oil
Saudi Arabia plays a key regulator role in the global oil market as the only country with substantial spare capacity and the most influential member of OPEC. Its production policy has swung from a market share strategy to active market management since the 2015 price collapse: after refusing to reduce production in 2014, the Kingdom agreed to a collective cut alongside Russia and other non-OPEC producers in November 2016, did another u-turn on production policy in the summer of 2018. We expect the leadership will continue to take action to avoid $30/bbl oil again.
Sophisticated Strategy
Saudi Aramco has leeway to implement production cuts to secure optional economics and keep market share in the crucial demand hotspots, such as China and emerging Asia. To sum up: the Kingdom’s broader market strategy has been one of picking its loss leaders and winning market share in the growth region that matters, using its dominant, heavier crudes.
Helima Croft
Head of Global Commodity Strategy and MENA Research, RBC Capital Markets
Helima is a Managing Director and the Head of Global Commodity Strategy and Middle East and North Africa (MENA) Research at RBC Capital Markets. She specializes in geopolitics and energy, leading a team of commodity strategists that cover energy, metals and cross-commodity investor activity. Helima is a member of the National Petroleum Council, a select group of individuals who advise, inform and make recommendations to the Secretary of Energy with respect to any matter relating to oil and natural gas. She also is a CNBC contributor, a member of the channel’s exclusive family of experts, is on the Board of Directors for the Atlantic Council, is a member of the Trilateral Commission, and is a Life Member of the Council on Foreign Relations. Helima joined RBC Capital Markets from Barclays, where she was a Managing Director and Head of North American Commodities Research. Prior to that, she worked in Lehman’s Business Intelligence group, the Council on Foreign Relations and the Central Intelligence Agency, where she focused on geopolitics and commodities. Helima has received many industry accolades throughout her career and received her PhD in economic history from Princeton in 2001.
Energy
