The Strategist

Saudi Public Investment Fund spends nearly $1B to buy oil companies papers

04/09/2020 - 03:57

The Saudi Arabia Sovereign Fund (Public Investment Fund, PIF) has begun to buy stakes in European oil and gas companies, taking advantage of the reduction in their quotes amid falling oil prices and the coronavirus pandemic, the Wall Street Journal reports citing its own sources.

In recent weeks, the Saudi Arabia Sovereign Fund has acquired stakes in Norwegian Equinor, Anglo-Dutch Royal Dutch Shell, French Total and Italian Eni totaling about $ 1 billion. From March 30 to April 6, PIF bought approximately 14.5 million shares of Equinor, becoming the 12th largest shareholder of this company, the majority share of which belongs to the state (Norway). It is not exactly known how many shares of the other three European companies the Saudi fund bought, but the total value of the securities is estimated at less than $ 1 billion.

Equinor shares have lost 23% since the beginning of this year. Papers of Royal Dutch Shell, Total and Eni depreciated by 35%, 31% and 33%, respectively. A barrel of Brent crude fell 52% this year, the newspaper notes.

Sources claim that the Saudi Arabia Sovereign Fund will continue to buy securities of such companies under favorable conditions for Riyadh. “PIF is once again active in the [stock] market. It won’t surprise me if similar deals happen in the future,” said the WSJ’s source.

The newspaper notes that kingdom's economy is apparently moving away from the diversification course proclaimed by the Crown Prince of Saudi Arabia. The course implied a refusal to enter the equity of private enterprises engaged in the exploration, production and sale of oil and natural gas. On the other hand, according to the newspaper, the kingdom’s budget deficit is expected to increase due to a reduction in revenues from the sale of black gold and an increase in spending designed to stimulate the economy and stop the effects of the coronavirus pandemic.

The WSJ notes that OPEC + countries will resume talks on the oil market on Thursday after a failed meeting in Vienna in early March. The cartel invited 36 oil producer countries to participate in the meeting via videoconference.