Saudi Arabia’s Aramco reported a 25% profit drop in the first quarter of 2020, following the oil plunge primarily caused by the crude oil price war it initiated against Russia.
Still, it is on track to pay its shareholders $75 billion despite the drop.
Saudi Aramco, the world’s most valuable company, will pay a dividend of $18.75 billion for the first three months of 2020, according to a statement,
Aramco’s income declined 25% year-on-year to 62.48 billion riyals ($16.6 billion) and refining swung to a loss before earnings and tax. It continues to blame any loss of profit on COVID-19, and disregards the fact that it attempted to flood the market, despite the drop in demand, and offered massive discounts to push out its competitors.
“The Covid-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a highly complex and rapidly changing business environment,” Chief Executive Officer Amin Nasser said. “Aramco has demonstrated resilience during economic cycles and has an unparalleled position due to a strong balance sheet and low-cost structure.”
Aramco is reducing its spending in order to pay the full dividends to its shareholders.
“We retain significant flexibility to adjust expenditures and have considerable experience in managing the business through times of adversity,” Nasser said. “This resilience will enable us to continue delivering on our commitments to our shareholders.”
Russia, Saudi Arabia and the remainder of OPEC+ did negotiate a reduction in production, but it appeared that it is too little too late, as crude oil prices appear stabilized but at relatively low prices, and the slightest “shake” sends the price several percent up or down.
Kuwaiti Oil Minister Khaled al-Fadel said that the country will support the initiative of Saudi Arabia to further reduce oil production and in June further reduce its output by an additional 80,000 bpd from the quota in the OPEC + agreement.
Thus, the country’s oil production in June will amount to 2.09 million bpd, and the reduction quota will reach 721,000 bpd from the level of October 2018.
On May 11th, UAE’s Minister of Energy, Suhail al-Mazrui, announced a reduction in oil production by 100,000 bpd in addition to obligations under the OPEC + deal in June, joining Saudi Arabia and Kuwait.
The Saudi Arabian Ministry of Energy ordered the Saudi Aramco state-owned company to reduce oil production in June by another 1 million bpd, in addition to the country’s obligations under the OPEC+ deal.
Thus, compared with April, the decline in production by Saudi Arabia will amount to 4.8 million bpd, in absolute terms, the country will produce 7.492 million bpd in June.
In addition, Saudi Aramco was instructed to find opportunities to reduce oil production in May below the level of 8.492 million bpd by agreement with customers.
A spokesman for the Department of Energy emphasized that the Kingdom’s goal is to encourage other producing countries to fulfill commitments and provide additional cuts to stabilize the global oil market through additional cuts.
As a result of these further reductions, and to reinforce the statement of “fluctuations” above – West Texas Intermediate crude oil surged 2.3% to $25.32 a barrel on the morning of May 11th. International benchmark Brent crude gained nearly 1% to $31.47 per barrel at the same time.
It should, once again, be reminded that the situation, despite COVID-19 being dubbed as the premiere reason for the crisis, it was actually Riyadh’s actions and refusal to reduce cuts, and flooding the market with discounted crude oil that caused the crisis, as it started carrying out its action before the crisis had even started, and the signs of collapse could be seen from a distance.
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