Profit of world's largest oil exporter Aramco falls 20% to $31.9 billion

Saudi oil giant Aramco on Tuesday reported a net profit of $31.9 billion in the first quarter of 2023, down 19.25 percent from the same period of 2022, reflecting lower hydrocarbon prices. The Saudi state-owned company alone generated more than three-quarters of the $40.5 billion in profits accumulated in the first quarter by the five industry "majors": BP, Shell, ExxonMobil, Chevron, and TotalEnergies.

Aramco, the world's largest crude exporter, posted a net profit of $39.5 billion in the first quarter of 2022, driven by soaring prices in the wake of Russia's invasion of Ukraine. Prices have fallen in recent months, to the point that the OPEC+ cartel of producing countries has recently intervened by reducing its production in an attempt to support them.

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We are continuing our expansion plans and our long-term outlook remains unchanged as we believe oil and gas will remain critical components of the global energy mix for the foreseeable future," Aramco CEO Amin Nasser said in a statement Tuesday. "The net profit could have been higher, but Aramco is multiplying investments, unlike (other oil companies)," said Jamie Ingram, an analyst at MEES.

A flagship of the Saudi economy, Aramco remains the main source of funding for the ambitious Vision 2030 reform program carried out in recent years by Crown Prince Mohammed bin Salman, the kingdom's de facto ruler. The company had announced "record" profits of $ 161.1 billion in 2022, allowing the kingdom to post its first annual budget surplus in nearly a decade, after years marked by the decline in oil prices on world markets.

'Chinese demand'

In mid-April, Saudi Arabia decided to transfer 4% of Aramco's shares, worth nearly $80 billion, to Sanabil Investments, a company itself controlled by the Public Investment Fund (PIF), one of the largest in the world with more than $620 billion in assets. Aramco had already transferred 4% of its shares last year to the PIF, a public body maneuvering to carry out economic reforms. The Saudi State remains a 90.18% shareholder.

Saudi Arabia has approved a surplus budget for 2023 of 16 billion riyals ($four billion) and forecasts GDP growth of 3.1 percent. On Sunday, however, the Finance Ministry announced a budget deficit of about $773 million for the first quarter of 2023, due to a 3 percent drop in oil revenues and higher spending. According to the authorities, this deficit "does not give rise to concern given the soundness of public finances".

Oil prices are falling because of fears of a global recession and on the US banking sector, despite the latest cuts by OPEC+, the cartel of oil countries led by Saudi Arabia and Russia. These cuts, announced in early April, and effective from May until the end of 2023, had been interpreted by many analysts as a desire of the alliance to defend a barrel of Brent above $ 80.

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The oil market is now dominated by negative investor sentiment due to banking risks in the United States," said Ibrahim al-Ghitani, an energy specialist based in the United Arab Emirates. But, he adds, "Chinese demand is expected to increase" over the course of the year.