Energy giant Saudi Aramco on Tuesday reported a 15 percent year-on-year decline in third-quarter profit, citing low oil prices.
The decline in net income this year to $27.58 billion in 2023 was “mainly due to the impact of lower crude oil prices and weaker refining margins,” the firm said in a statement posted on the Saudi Stock Exchange. “.
Saudi Arabia, the world’s largest crude oil exporter, is currently producing about nine million barrels per day (bpd), far below its potential of 12 million bpd.
This reflects a series of production cuts from October 2022.
“Despite the low oil price environment, Aramco delivered strong net income and generated strong free cash flow during the third quarter,” Chief Executive Amin Nasser said in a statement.
Aramco is the jewel of the Saudi economy and the main source of revenue for Crown Prince Mohammed bin Salman’s Vision 2030 reform agenda, which aims to prepare the Gulf kingdom for a prosperous post-oil future.
Its profits help finance major projects including NEOM, the planned future mega-city being built in the desert, a giant airport in Riyadh, and major tourism and leisure developments.
Aramco reported record profit in 2022 after oil prices rose following Russia’s attack on Ukraine.
But its profits fell by a quarter last year due to low oil prices and production cuts.
Profit was down 14.5 percent in the first quarter of this year and 3.4 percent in the second quarter.
Armed conflict in the Middle East, including direct attacks between Iran and Israel, has prompted some market volatility but has not kept oil prices from rising.
The price of international benchmark Brent was around $75 a barrel on Tuesday.
That’s well below the $96.2 mark the International Monetary Fund said in April would be Saudi Arabia’s fiscal break-even oil price at current production levels.
“Markets appear to be dismissing geopolitical risk in the Middle East, so anything short of real supply disruptions” would be unlikely to put downward pressure on prices, said Amena Bakr, senior research analyst at Energy Intelligence.
“There has been no disruption in supplies so far.”
US President Joe Biden said in October that Israel should consider “options other than attacks on oil fields” in its attacks on Iran.
“Some in the market believe this is an attempt to keep prices low ahead of the U.S. election,” Bakker said, referring to Tuesday’s poll.
– low expectations –
Jamie Ingram, senior editor of the Middle East Economic Survey, said the “year-on-year decline in Aramco’s profits” is not a surprise for the government, which has already lowered revenue expectations for this year based on weak oil markets. Is done. ,
On Sunday Saudi Arabia and seven other members of the OPEC+ group of oil-producing nations said they were extending a 2.2 million barrel cut announced in November 2023 by another month, until the end of December.
“When it comes to oil production policy, they will try to assess what will ultimately bring in the most revenue,” Ingram said.
“Is it to maximize volumes or to maximize prices? For now, the strategy remains the latter.”
The Saudi Finance Ministry said in September that it expected the budget deficit to reach 2.3 percent of GDP in 2025 and to continue through 2027.
Aramco announced last year that it would begin paying a performance-based dividend in addition to its base dividend.
Its statement on Tuesday said the company will maintain its $20.3 billion base dividend for the third quarter and pay a $10.8 billion performance-based dividend for the fourth quarter.
The government’s stake in Aramco, one of the world’s largest companies by market capitalization, is about 81.5 percent.
Aramco’s initial public offering in 2019, the largest in history, raised $29.4 billion, and a secondary offering of about 1.7 billion shares this year brought in $12.35 billion.
Saudi Arabia has pledged to achieve net zero carbon emissions by 2060, a statement that has drawn deep skepticism from environmental activists.
Aramco has also vowed to achieve “operational net-zero” carbon emissions by 2050, which excludes emissions from customers burning its products.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
