Saudi Aramco 2222.SE shares fell by as much as 10% on Monday, extending a dive below the initial public offering price, after Saudi Arabia cut its official selling prices for crude and global oil markets plunged in response to news of a big output increase.
Government bonds in Saudi Arabia and other Gulf oil producing nations were also hit.
Aramco fell below its IPO price on Sunday for the first time since trading began in December when the company’s listing was seen as a culmination of years of Crown Prince Mohammed bin Salman’s efforts to diversify the economy.
Since then sentiment towards oil and oil shares has been damaged by the impact of the coronavirus on demand and Russia’s refusal to support deeper output cuts, prompting the Organization of the Petroleum Exporting Countries to remove all limits on its own production.
Shares in Aramco were at 27 riyals ($7.20) in early trade, 15.6% below its IPO price of 32 riyals, which in December valued the company at $1.7 trillion in the world’s biggest share offering.
By mid-session trade, prices had stabilised slightly and were 6.8% lower versus the day’s early lows that marked a 10% fall from Sunday’s close.
Benchmark Brent LCOc1 crude fell by up to a third on Monday after Saudi Arabia, the world’s lowest cost producer, said it would increase output to gain market share.
“The Saudi reaction to the breakdown (with Russia) was to revert to the 2014 playbook. By precipitating an oil price collapse, they are looking to end their subsidy of higher cost producers,” Akber Khan, head of asset management at Al Rayan Investment, said.
“This is a painful strategy that requires time to play out and failed on the previous attempt.”
Aramco’s stock hit an intraday high of 38.70 riyals on its second day of trading but has eased since because of concerns the valuation was too high.