Saudi Arabia’s Aramco Reports Lower Half-Year Profits as Economic Concerns Weigh on Energy Prices

Saudi Arabian Oil Co., commonly known as Aramco, has reported a half-year profit of $56.3 billion, a decline from $61.9 billion in the same period last year. The company’s revenue for the first half of 2024 reached $220.7 billion, up from $218.6 billion the previous year.

Despite current economic challenges, Aramco remains optimistic. CEO Amin H. Nasser highlighted a record global oil demand of 103.2 million barrels per day in the first half of 2024, with expectations for continued growth. The company plans to distribute dividends of $20.3 billion for the second quarter and a performance-linked dividend of $10.8 billion, aiming for a total annual dividend exceeding $124 billion.

Market Context

Aramco’s profit decline is linked to broader economic factors, including fluctuations in global oil prices. The price of Brent crude was around $77 a barrel following significant market volatility. Recent economic data, such as a slower-than-expected increase in US hiring, has raised concerns about the Federal Reserve’s impact on the US economy, contributing to global market instability.

Production and Pricing

Aramco continues to produce over 12 million barrels of oil per day and retains the capability to increase production by an additional 3 million barrels daily if required. The company sold oil at approximately $85.70 per barrel in the second quarter, an increase from $83 in the first quarter. Despite the lower profits, Aramco is well-positioned due to consistent demand and low global inventories.

Market Position and Future Plans

With a market value of $1.7 trillion, Aramco is the world’s fifth-most valuable company. However, its stock has fallen by nearly 20% over the past year due to declining oil prices. Saudi Arabia, leveraging its low production costs, aims to diversify its economy away from oil through projects like the $500 billion Neom city. Lower oil prices may force the kingdom to reconsider some of these ambitious plans.

Aramco’s substantial profits come under scrutiny amid global concerns about climate change. Activists have criticised the company for its role in fossil fuel production, highlighting the environmental impact and the need for a transition to sustainable energy sources.