A Saudi Aramco plant Photo: IC

Chinese entities are seeking to stabilize domestic petroleum supplies and have a say in international oil pricing through their reported purchase of Saudi Aramco shares, Chinese experts say.

However, the weak outlook for crude prices has brought uncertainty to the deal, they said.

Saudi Aramco on Sunday announced the price range for its IPO, which places its valuation between $1.6 trillion and $1.7 trillion ahead of its public debut.

The price range for the offering has been set at Saudi riyals 30 to 32 ($8 to $8.53), with the shares to be listed on Saudi Arabia's stock exchange, the Tadawul. The IPO is expected to raise more than $24 billion, the largest IPO on record. 

But the issuance of 3 billion common shares will only account for 1.5 percent of the oil giant's total equity.

Chinese state-owned entities including the Silk Road Fund, Sinopec Corp and China Investment Corp are in talks about investing $5 billion to $10 billion in Aramco's IPO, Bloomberg reported, citing people familiar with the matter.

None of these companies could be reached as of press time. However, Jin Lei, an associate professor at the China University of Petroleum, told the Global Times on Monday that it's very likely these entities will invest in Aramco, out of consideration of energy security.

"Aramco is a major oil producer with low production costs, which can secure supply for China's growing domestic oil demand," Jin said.

Scope for cooperation between China, the world's largest oil importer, and Saudi Arabia, a major exporter, are great, Jin said, noting that the investment may also help Chinese entities gain influence over international oil pricing.

The US Energy Information Administration on Wednesday forecast that Brent spot prices will average $60 per barrel in 2020, down from a 2019 average of $64 per barrel.

The valuation of Aramco's IPO is below earlier estimates. The promotion of its IPO, which envisions a reduction in reliance on oil exports, hasn't had a positive response from US and European capital markets, according to media reports.

However, the weak oil price outlook has cast shadows over the deal for China entities, experts said.

As Aramco's market valuation is highly related to oil prices, the deal is not attractive for Chinese investors in terms of yield, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times.

As for international oil pricing power, investments of the size that are being reported won't give the Chinese entities much say, Lin said. 

"Even if Chinese investors put in up to $10 billion as reported, it would merely account for a tiny proportion of the $1.7 trillion," he said.

Aramco's IPO prospectus showed that institutional investors must enter bids between this past Sunday and December 4.