On Sunday, Saudi Aramco announced a 24.7 percent decrease in profits for 2023 compared to the previous year, which was caused by lower oil prices and reduced production.
The company stated in a filing with the Saudi stock market that its net income was 454.7 billion Saudi riyals ($121.25 billion) in 2023, down from 604.01 billion Saudi riyals ($161.07 billion) in 2022.
Aramco explained that the decline was mainly due to lower crude oil prices, decreased sales volumes, and weaker refining and chemicals margins.
The oil prices soared after Russia's invasion of Ukraine in February 2022, reaching over $130 per barrel that year.
In 2022, Aramco reported record profits, marking the kingdom's first annual budget surplus in almost ten years.
Aramco CEO Amin H. Nasser stated, "In 2023, we achieved the second-highest net income. Our resilience and agility led to strong cash flows and high profitability, despite challenging economic conditions."
He also mentioned, "We also provided a 30% year-on-year increase in total dividends paid in 2023 to our shareholders."
Last year, oil prices dropped to $85 per barrel, resulting in profit declines of 23 percent in the third quarter, 38 percent in the second quarter, and 19.25 percent in the first quarter for Aramco.
Jadwa Investment, a Riyadh-based firm, predicted that prices would increase to around $88 per barrel this year due to global uncertainty arising from the Israel-Hamas war.
Jadwa Investment further stated that prices could reach $90 per barrel by the end of 2024.
– Extended supply cuts –
The world’s largest crude oil exporter announced it was prolonging its oil supply cuts of one million barrels per day until June.
Riyadh initially declared its voluntary cut after an OPEC+ meeting in June 2023.
This decision followed an April 2023 agreement by several OPEC+ members to voluntarily reduce production by over one million barrels per day (bpd). This unexpected move briefly supported prices but did not result in a lasting recovery.
Energy sector expert Ibrahim al-Ghitani informed AFP that Saudi Arabia “bears the greatest burden of reducing production as it is the largest producer within the (OPEC+) coalition and OPEC”.
Ghitani commented, “If it were not for the OPEC+ policy, oil prices would have been below the level we see today above $80 per barrel, especially amid signs of turmoil in the global economic environment following the coronavirus pandemic, the Ukrainian war, and then the Gaza war.”
The kingdom's daily production is currently around nine million bpd, significantly lower than its reported daily capacity of 12 million bpd.
“Saudi Arabia is aiming to protect against the overall decline in oil prices by diversifying its business portfolio and focusing on gas production, as well as petrochemicals and foreign expansion,” stated a UAE-based expert.
The Gulf monarchy's gross domestic product decreased by 0.8 percent in 2023 due to the reduction in oil revenues, as reported by its statistics authority.
Under Crown Prince Mohammed bin Salman, the effective ruler, Saudi Arabia has tried to both open up and diversify its oil-dependent economy, spending a lot on highly promoted projects like a futuristic megacity called NEOM.
Aramco is the primary source of income for Prince Mohammed’s ambitious economic reform plan known as Vision 2030.
On Thursday, the country announced it moved an additional eight percent Aramco stake to companies owned by the kingdom’s Public Investment Fund.
The transfer increased the cumulative shares transferred to the PIF, one of the world’s biggest sovereign wealth funds, and its subsidiaries to 16 percent.
The stake was valued at about $164 billion at the company’s current market capitalization, according to an Aramco media officer who spoke to AFP.
AFP
