Energy Giant Saudi Aramco on Tuesday announced a 15% drop in third-quarter profit year-on-year, citing low oil prices.

The drop in net profit to $27.56 billion this year from $32.58 billion in 2023 “was mainly due to the impact of lower crude oil prices and weakening refining margins,” the company said in a statement published on the Saudi stock exchange.

Saudi Arabia, the world’s largest crude exporter, currently produces around nine million barrels per day (bpd), well below its capacity of 12 million bpd.

This reflects a series of production cuts since October 2022.

On Sunday, Saudi Arabia and seven other members of the OPEC+ group of oil-producing countries announced they were extending for another month, until the end of December, a 2.2 million barrel cut announced in November 2023.

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“Aramco reported robust net profit and generated strong free cash flow in the third quarter, despite a falling oil price environment,” Chief Executive Officer Amin Nasser said in a statement.

The company strives to “consolidate our position as a global leader in the energy and petrochemical sectors,” he added.

Aramco is the jewel of Saudi Arabia economy and the main source of revenue for Crown Prince Mohammed bin Salman’s Vision 2030 reform program, which aims to prepare the Gulf kingdom for a prosperous post-oil future.

Its profits help finance flagship projects such as NEOM, the futuristic megacity under construction in the desert, a giant airport in Riyadh and major tourism and leisure developments.

Aramco posted record profits in 2022 after Russia’s invasion of Ukraine sent oil prices soaring.

But its profits fell by a quarter last year due to falling oil prices and production cuts.

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Profits fell 14.5 percent in the first quarter of this year and 3.4 percent in the second quarter.

Lower expectations

Aramco’s year-on-year decline in profits “is no surprise to the government which has already revised its revenue forecasts downward for this year due to weakening oil markets,” said Jamie Ingram, editor of the Middle East Economic Survey. .

“When it comes to oil production policy, they will try to assess what will ultimately bring in the most revenue. Is it about maximizing volumes or maximizing prices? For now, the strategy remains the latter.”

The IMF said in April that at current production levels, the break-even price of Saudi oil would be $96.2 per barrel in 2024.

Brent, the international benchmark, has been volatile and consistently well below that level, with a price of around $75 a barrel on Tuesday.

The Saudi Finance Ministry said in September that it expected a budget deficit of 2.3% of GDP in 2025 and for deficits to continue until 2027.

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The government’s stake in Aramco, one of the world’s largest companies by market capitalization, is about 81.5 percent.

Aramco’s 2019 IPO, the largest IPO in history, raised $29.4 billion, and a secondary offering this year of nearly 1.7 billion shares raised 12 .35 billion dollars.

In January, Aramco announced that it had been instructed to abandon a plan to increase production capacity to 13 million barrels per day, from its current level of 12 million barrels per day.

Analysts said the surprise announcement could reflect a lack of confidence in demand, although Energy Minister Prince Abdulaziz bin Salman said it was driven by the transition to cleaner fuels.

Saudi Arabia has pledged to achieve net zero carbon emissions by 2060, a statement that has sparked intense skepticism from environmental activists.

Aramco has also committed to achieving “net operating” carbon emissions by 2050, which does not include emissions from customers burning its products.

Source: AFP