production cuts and net profit down in first quarter

production cuts and net profit down in first quarter
production cuts and net profit down in first quarter

The oil giant Saudi Aramco announced on May 7 a net profit of 27.27 $ billion in the first quarter, down 14.5 % compared to the same period last year, as the Gulf kingdom maintained its black gold production cuts

“Net profit for the first quarter of 2024 is 102.27 billion SAR (27.27 billion), compared to 119.54 billion SAR (31.88 billion) for the same quarter in 2023″indicated the group in a document sent to the Saudi Stock Exchange, explaining that “the decline was primarily the result of a decrease in the volume of crude oil sold.”

The world’s largest exporter of crude oil, Saudi Arabia currently produces about 9 M barrels per day (bpd)well below its capacity of 12 M from bpd.

A series of production cuts

This follows a series of production cuts dating back to October 2022, when the oil-producing countries of OPEC+, the Organization of the Petroleum Exporting Countries and their allies that Riyadh co-leads with Moscow, announced a reduction of their production by 2 M barrels per day to raise prices.

In addition to this reduction, Saudi Arabia and several other OPEC+ members agreed in April 2023 to reduce their production by more than 1 M from bpj. After an OPEC+ meeting in June 2023, Saudi Arabia announced a further reduction of 1 M from bpj.

In March, the Saudi Ministry of Energy said the latest reduction, which took effect in July 2023, would be extended until the second quarter of 2024after what “these additional reduction volumes will be returned gradually depending on market conditions.”

Preparing the country for post-oil

Aramco is the crown jewel of the Saudi economy, and the country’s de facto ruler, Crown Prince Mohammed bin Salman, badly needs oil revenues to finance an ambitious program of economic and social reforms known as “Vision 2030.” , which aims to prepare the country for the post-oil era.

Aramco sold 1.7 % of its shares on the Saudi stock market in December 2019, generating 29.4 billion during the largest IPO in the world.

Saudi Arabia recently transferred a new tranche of Aramco shares to the Public Investment Fund (PIF), the center of a broad reform program by the kingdom.

Budget deficits

In December, the Saudi Ministry of Finance indicated that it planned budget deficits until 2026because it maintains high spending on reforms.

Saudi Arabia’s GDP decreased by 1.8 % over one year in the first quarter of 2024 compared to 2023, the General Statistics Authority said in a preliminary estimate released last week. “This decline is mainly due to a drop of 10.6 % of petroleum activitiesaccording to this institution.

Net zero emissions objective

Saudi Arabia is committed to achieve net zero carbon emissions by 2060sparking some skepticism among environmental activists.

Aramco, for its part, aims for carbon neutrality of its operations in 2050not counting the emissions produced by the oil exported and burned by its customers.



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