Saudi Arabia’s sovereign wealth fund took advantage of the plunge in global oil prices following the country’s price war with Russia in March to scoop up billions of dollars worth of shares in downtrodden energy companies, including Canadian firms, according to recent disclosures.
Filings with U.S. Securities and Exchange Commission indicate the kingdom’s Public Investment Fund, which has an estimated US$320 billion in assets under management, bought stakes worth US$481 million and US$408 million in Suncor and Canadian Natural Resources, respectively, some time during the first quarter of 2020.
Saudi Arabia’s finance minister, Mohammed al-Jadaan, however, was more specific, telling the Wall Street Journal recently that those purchases were indeed made in March.
That month, the values of the Canadian producers and three other energy stocks PIF bought — Royal Dutch Shell plc, Total SA and BP plc — had all more than halved from their 52-week highs.
PIF is now the 10th-largest shareholder in Suncor and the sixth-largest holder Canadian Natural Resources, according to NASDAQ data.
Less than a month after buying the stocks, Saudi Arabia agreed to production curtailments that laid the groundwork for a recovery in oil prices. Assuming it hasn’t sold any shares, PIF’s positions in these five stocks have earned it more than US$182.6 million since the end of March.
When asked about the Saudi investments and the timelines of events, a spokesperson for Alberta’s Ministry of Energy, said the regulation of these stocks is outside its jurisdiction.
“It is not uncommon for investors to buy stocks when at lows, especially when those lows are widely viewed to be a temporary phenomenon,” the spokesperson said. “That said, we would obviously be concerned if foreign actors were manipulating global commodity markets and opportunistically capitalizing on the situation.”
PIF and Saudi Arabia’s ministry of finance did not respond to requests to comment on their investments.
I wouldn’t put it past them that (buying energy stocks before trying to boost the market) was the strategy. But I don’t know if they have the power to do it
Ellen Wald, president, Transversal Consulting
Jim Krane, an energy research fellow at Rice University’s Baker Institute for Public Policy in Houston, said the timing of events is suspect, but manipulating the markets in this way would not be logical. Saudi Arabia often launches price wars as an “enforcement mechanism to bring wayward producers in line,” he said, but demand fell immediately after its dispute with Russia due to the global economic shutdown. While Saudi Arabia may have earned hundreds of millions from the stocks it bought, it likely lost billions when Brent prices crashed.
“There’s the appearance of a conflict of interest if you’re manipulating oil prices with one hand and buying shares in foreign oil companies damaged by your manipulations with the others,” said Krane, who is the author of Energy Kingdoms: Oil and Political Survival in the Persian Gulf. “Was that the rationale? I doubt it.”
Instead, Krane said, it looks as though Saudi Arabia is “bargain hunting.” PIF has disclosed its U.S. holdings to the SEC since 2018, but only ever owned Tesla Inc. and Uber Technologies Inc.
In March, it turned to a new strategy and bought 23 stocks, with each position being worth several hundred million dollars. PIF’s shopping list included the oil stocks, Walt Disney Co., Live Nation Entertainment Inc. and Carnival Corp., some of the companies hardest hit by the pandemic.
Of course, there are still concerns about the relationship Saudi Arabia’s energy sector has to PIF. Yasir Al-Rumayyan is both the head of PIF and the chairman of Saudi Aramco, a situation that opens the door to potential co-ordination between the two entities and Crown Prince Mohammed bin Salman, said Ellen Wald, president of Transversal Consulting and author of the book Saudi Inc.
“I wouldn’t put it past them that (buying energy stocks before trying to boost the market) was the strategy,” Wald said. “But I don’t know if they have the power to do it.”
The kingdom’s lack of total influence was evident when it announced the end of the price war in April and crude prices continued to fall, she said.
Wald added that PIF is operating in free markets and there’s nothing wrong with it buying shares in other energy companies.
If the companies are publicly traded, it’s not as if they can block those investments. And regulators, she said, would likely only get involved if it tried to buy a controlling stake.
“You’re a sovereign nation with a lot of influence,” she said. “I’m surprised they weren’t doing this all along.”
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