Due To Falling Oil Prices Saudi Aramco’s Net Profit Decreased By 24.7% Compared To The Previous Year

Saudi Arabia’s state-owned oil company Aramco, the world’s largest oil company, announced that last year’s net profit decreased significantly compared to the previous year due to falling oil prices and cuts in crude oil production.

According to foreign media such as Bloomberg News on the 10th (local time), Aramco’s net profit last year was $121.3 billion (about 160 trillion won), down 24.7% from the same period last year. Total sales also decreased by 17% during the same period, reaching $440.88 billion. Free cash decreased from $148.5 billion to $101.2 billion. Aramco analyzed that its net profit decreased due to falling crude oil prices, decreased sales volume, and worsening margins in the refining and chemical sectors.

After Russia invaded Ukraine in February 2022, the energy supply chain was disrupted, and oil prices reached an all-time high of over $130 per barrel. Aramco’s net profit that year soared about 46% from $110 billion in 2021. However, last year, oil prices fell again to $85 per barrel, and Aramco’s profitability deteriorated. On the 8th, on the New York Mercantile Exchange, April delivery West Texas Crude Oil ( WTI ) closed at $78.01, and on the London ICE Futures Exchange, April Brent crude oil futures closed at 82.08 per barrel.

However, in absolute terms, Aramco’s net profit last year was the second largest ever. “Last year was a year in which global oil demand reached record levels despite geopolitical fluctuations, economic headwinds, and inflationary pressures,” said Aramco CEO Amin Nasser . “It was profitable,” he said.

Dividends to shareholders increased by 30% compared to the previous year, paying $97.8 billion. Bloomberg News said, “The Saudi Arabian government covers most of its income through huge dividends,” and added, “Aramco’s increased dividend is a great help to the Saudi Arabian government, which is facing an expanding fiscal deficit.”

Crown Prince and Prime Minister Mohammed bin Salman, who leads Saudi Arabia, is reforming the economic structure in preparation for the post-oil era by promoting ‘Neom’, a large real estate development project, and developing tourism resources. This is why the Saudi government needs enormous funds. According to Bloomberg, Aramco is expected to pay more total dividends to investors and the Saudi Arabian government this year than in 2023.

Saudi Arabia is limiting oil production to prevent oil prices from falling due to oversupply. The Organization of the Petroleum Exporting Countries (OPEC) and OPEC + , a coalition of major oil producing countries, decided earlier this month to extend voluntary crude oil production cuts originally scheduled for the first quarter of this year until the second quarter. Aramco’s daily oil production decreased from 11.5 million barrels in 2022 to 10.7 million barrels last year.

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