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As the world waits for US President Donald Trump’s decision on the Iran nuclear deal, the Gulf oil diplomacy is in full play.

Reports say the Saudi Arabia is backing sanctions on Iran as it wants to push crude prices to around $100 a barrel.

Analysts believe Saudi Arabia aims to see much higher oil prices to overcome its domestic financial difficulties and raise the valuation of state oil giant Aramco ahead of a planned five-per cent IPO.

Rising crude will give a high valuation to Aramco, thereby giving more money to Saudi government. Saudi Aramco had net income of $33.8 billion in the first six months of 2017 and cash flows of $52.1 billion. Crown Prince Mohammed bin Salman, who has made the Aramco IPO a cornerstone of Saudi economic 2030 reform, wants to raise a record $100 billion by selling a five per cent stake in the company on local and foreign exchanges.

It would give Aramco a market capitalisation of $2 trillion, the biggest achieved by any company and dwarfing peers such as Exxon Mobil and Royal Dutch Shell.

After prices hit $70 a barrel, the kingdom "is thought to be unofficially gunning for $80 a barrel, with some even suggesting that it favours a return to $100 (a barrel) oil", Stephen Brennock of PVM Oil Associates said.

"As well as helping to reduce the Saudi government balance sheet, a further spike in prices would act as a boon for the impending Aramco IPO," Brennock said.

"This is why Saudi Arabia is intentionally keeping the supply of oil tight," German banking and financial services company Commerzbank said.

Iran, on the other hand, does not support the relentless rise in crude prices and has already signalled a sharp split with regional foe Saudi Arabia that wants high crude prices.

Iran believes that $60 to $65 a barrel constitutes a “suitable price” for oil. But its outlook contrasts sharply with the Saudi-led organization of the petroleum exporting countries or OPEC, which is targeting prices closer to $80 a barrel.

The OPEC, however, does not have a price target for oil. "We never have a price target ... Prices are determined by the market," said Saudi Energy Minister Khaled al-Faleh who warned against the danger of price fluctuations, saying "volatility is our enemy."

OPEC and non-OPEC producers struck a deal in late 2016 to trim production by 1.8 million barrels per day to reduce a global glut that sent prices crashing.

The deal, which is due to run out at the end of this year, has helped boost oil prices to above $70 a barrel from below $30 in early 2016.

Iran does not support the relentless rise in crude prices.

As the world waits for US President Donald Trump’s decision on the Iran nuclear deal, the Gulf oil diplomacy is in full play. Reports say the Saudi Arabia is backing sanctions on Iran as it wants to push crude prices to around $100 a barrel. Analysts believe Saudi Arabia aims to see much higher oil prices to overcome its domestic financial difficulties and raise the valuation of state oil giant Aramco ahead of a planned five-per cent IPO. Rising crude will give a high valuation to Aramco, thereby giving more money to Saudi government. Saudi Aramco had net income of $33.8 billion in the first six months of 2017 and cash flows of $52.1 billion. Crown Prince Mohammed bin Salman, who has made the Aramco IPO a cornerstone of Saudi economic 2030 reform, wants to raise a record $100 billion by selling a five per cent stake in the company on local and foreign exchanges. It would give Aramco a market capitalisation of $2 trillion, the biggest achieved by any company and dwarfing peers such as Exxon Mobil and Royal Dutch Shell. After prices hit $70 a barrel, the kingdom "is thought to be unofficially gunning for $80 a barrel, with some even suggesting that it favours a return to $100 (a barrel) oil", Stephen Brennock of PVM Oil Associates said. "As well as helping to reduce the Saudi government balance sheet, a further spike in prices would act as a boon for the impending Aramco IPO," Brennock said. "This is why Saudi Arabia is intentionally keeping the supply of oil tight," German banking and financial services company Commerzbank said. Iran, on the other hand, does not support the relentless rise in crude prices and has already signalled a sharp split with regional foe Saudi Arabia that wants high crude prices. Iran believes that $60 to $65 a barrel constitutes a “suitable price” for oil. But its outlook contrasts sharply with the Saudi-led organization of the petroleum exporting countries or OPEC, which is targeting prices closer to $80 a barrel. The OPEC, however, does not have a price target for oil. "We never have a price target ... Prices are determined by the market," said Saudi Energy Minister Khaled al-Faleh who warned against the danger of price fluctuations, saying "volatility is our enemy." OPEC and non-OPEC producers struck a deal in late 2016 to trim production by 1.8 million barrels per day to reduce a global glut that sent prices crashing. The deal, which is due to run out at the end of this year, has helped boost oil prices to above $70 a barrel from below $30 in early 2016.

Ahead of US decision on Iran deal, a look at Gulf oil diplomacy

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