Saudi Arabia's dream of securing a US$100 billion ($136b) windfall from the IPO of Aramco may be clouding its judgment. The kingdom needs higher oil prices to entice international investors to buy a stake in the state-owned company, which supplies almost all its crude.
Using its clout to restrict global supplies and pump up the cost of its barrels makes the mega-offering look more appealing, but the move has also revived the kingdom's biggest enemy in the form of US shale oil.
Oil prices have climbed 33 per cent to trade at about US$70 per barrel since the Organisation of the Petroleum Exporting Countries (Opec), with the help of Russia, agreed in late 2016 to shave 1.8 million barrels per day (bpd) of crude from world supplies. That deal has now been extended for another year. The new timeline is conveniently synced with the scheme to offload up to 5 per cent of Aramco by the end of 2018.
The IPO is the pet project of Crown Prince Mohammed bin Salman (MBS). The heir to the Saudi throne seized control of all economic power levers in the kingdom last year when he ousted his cousin to become first in line to succeed his ageing father, King Salman.
Described by Western diplomats as headstrong and demanding, the royal has embarked on a radical shake-up. His reforms have included ordering the detention of hundreds of Al-Saud family members in an anti-corruption inquiry and reining in the powers of the ultra-conservative religious police.