Saudi Arabia’s state-owned oil company, Saudi Aramco, has posted a 25% dip in profits following the collapse of global oil markets triggered by the coronavirus pandemic.
The world’s most profitable company reported net profits of 62.48bn riyals ($16.64bn) for the first quarter of the year, down sharply from 83.29bn riyals a year earlier, after a two-thirds drop in the global price of oil.
Global oil prices fell to 21-year lows last month before the world’s largest oil-producing countries, led by Saudi Arabia, struck a deal to limit global production from May to help drain the glut of crude in the global market.
The most ambitious oil supply deal ever brokered by the Opec oil cartel could result in 9.7m barrels of oil a day held back from the global market, which is awash with oil following the collapse in demand for crude and transport fuels during the pandemic.
Aramco’s CEO, Amin Nasser, said: “Looking ahead to the remainder of 2020, we expect the impact of the Covid-19 pandemic on global energy demand and oil prices to weigh on our earnings.”
The oil market crisis is expected to seriously affect Aramco, which has been instructed by the Saudi state to cut production to help support global oil prices, and will earn fewer dollars for the barrels it will continue producing.
“Longer term we remain confident that demand for energy will rebound as global economies recover,” Nasser said.
The International Energy Agency has warned that demand for oil would fall by a record 9m barrels of oil a day, erasing a decade of oil demand growth, because of the virus. Some energy experts believe oil demand may never recover to levels recorded in 2019.
Saudi Arabia said on Monday it would deepen its planned production cuts by a further 1m barrels of oil a day from next month, to 4.8m barrels a day, to help drive oil prices up from around $30 a barrel.
The collapse in crude prices has also wiped billions of dollars from Aramco’s market value, just months after the company’s controversial market float late last year. The share price has fallen from 32 riyals a share in December to 31.25 riyals on Tuesday, following the steady fall in oil prices due to an oversupply of unwanted crude.
Saudi Aramco’s dividend payout for the quarter is in line with its plan for a $75bn payout to shareholders for the year, but the company did not rule out a dividend cut later this year.