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Saudi Arabia’s state-owned oil giant Aramco reported a significant decrease in profit on Tuesday. The news is likely related to oil prices being lower than they were a year ago, and the company is bullish following recent deals in China and the United States.
Aramco’s net income for the first quarter of 2023 was $31.9 billion. This constituted a roughly 19% decrease from the $39.5 billion reported during the same period in 2022, Aramco said in a press release.
Background: The price of Brent crude oil, considered the benchmark for global oil prices, was more than $80 per barrel at the start of 2022 and ultimately rose above $100 by the end of the first quarter in March of that year. This was largely due to the supply chain shocks related to the Russian invasion of Ukraine.
Oil prices fell later in the year. At the start of this year, Brent crude was trading around $85 per barrel but fell below $73 per barrel in March.
Saudi officials have repeatedly said that market “stability” is their goal. Unsurprisingly, the Saudi-led OPEC+ alliance announced a supply cut in April in a bid to bring prices back up. Brent crude prices rose following the announcement but then fell again and traded at around $77 per barrel on Tuesday.
Why it matters: Aramco CEO and President Amin Nasser said the company’s “growth strategy remains on track” following the quarterly results. Nasser specifically pointed to agreements Aramco has made with entities in America and Asia recently, per the press release.
Last week, Aramco signed a deal with China’s Baosteel to build a steel complex in Saudi Arabia as the kingdom continues to diversify away from oil. In March, Aramco acquired a 10% stake in the Chinese firm Rongsheng Petrochemical and signed a $6 billion deal with the Export-Import Bank of Korea to help South Korean companies win contracts in Saudi Arabia. Aramco also acquired part of the US refinery company Motiva in January.
Also on Tuesday, the Dubai-based Middle East Economic Digest reported that Aramco is “close” to awarding major engineering and construction contracts to firms based in the United States, the United Arab Emirates and Italy.
Know more: There is speculation that Aramco could list on the Hong Kong Stock Exchange due to the company’s increasing business with China, Harry Clynch reported for Al-Monitor in April.
