A decline which “mainly reflects the impact of the drop in volumes of crude oil sold and the weakening of refining margins”, according to the group.
Saudi oil giant Aramco on Tuesday reported a 15% drop in third-quarter net profit compared to the same period last year, due to low oil prices and a reduction in production. Net profit amounted to $27.56 billion compared to $32.58 billion in the third quarter of 2023, a decline which “primarily reflects the impact of lower volumes of crude oil sold and weakening refining margins”the company said in a statement published on the Saudi Stock Exchange. Saudi Arabia, the world’s top crude exporter, currently produces around 9 million barrels per day (mbd), well below its capacity of 12 mbd. The relatively low figure reflects a series of production cuts dating back to October 2022. On Sunday, Saudi Arabia and seven other members of the OPEC+ oil producing bloc announced extending a production cut until the end of December of 2 mbd announced in November 2023 with a view to raising prices.
The Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and their allies led by Russia, concluded an agreement called OPEC+ in 2016 to better influence the market. “Aramco delivered strong net income and generated strong free cash flow during the third quarter, despite weak oil prices”its general director, Amin Nasser, said in a separate statement on Tuesday. The company strives to “strengthen (its) position as a major global player in energy and petrochemicals”he added. Aramco is the jewel of the Saudi economy and the main source of revenue for Crown Prince Mohammed bin Salman’s Vision 2030 reform program, which aims to prepare the kingdom for the post-oil era.
“Should we maximize volumes or prices?”
The company’s profits allow Saudi Arabia to finance flagship projects, including Neom, the futuristic megacity under construction in the desert, a vast airport in Riyadh, as well as major development projects in the tourism and tourism sector. hobbies. Aramco posted record profits in 2022 after Russia’s invasion of Ukraine, which sent black gold prices soaring. But its profit fell by a quarter last year due to falling oil prices and production cuts.
Profit for the first quarter of this year fell by 14.5% and that of the second quarter by 3.4%. Aramco’s annual profit decline “does not surprise the government, which has already revised its revenue forecasts downward for this year due to the weakness of the oil markets”estimates Jamie Ingram, of the specialized publication Middle East Economic Survey. “In terms of oil production policy, they will seek to evaluate what will generate the most revenue in the end. Should we maximize volumes or prices? For the moment, the strategy remains focused on prices”he assures.
Budget deficit
The International Monetary Fund (IMF) indicated in April that, at current production levels, the price of a barrel of oil should be $96.2 in 2024 for Saudi Arabia to balance its budget. The price of a barrel of Brent, the world oil benchmark, stood at $75 on Tuesday, well below the threshold required to balance the Saudi budget. The Saudi Finance Minister said he expects a budget deficit of around 2.3% of gross domestic product (GDP) in 2025, which is expected to widen over the following two years.
The Saudi state’s stake in Aramco, one of the world’s largest companies by market capitalization, is approximately 81.5%. Aramco’s 2019 partial IPO, the largest in history, raised $29.4 billion, and a secondary offering this year of nearly 1.7 billion shares raised 12 .35 billion dollars.
