Drop in Saudi Aramco's profits by 22% due to lower prices
Saudi Arabia's national oil company, Aramco, has reported a significant decline in profits for the second quarter of 2023, marking ten consecutive quarters of losses. This downturn comes after a high point in 2022, with the company's market value losing more than $800 billion since then.
Aramco, the world's biggest oil exporter, saw a decrease in profits, with the current oil prices hovering around $70 a barrel. The slump in prices affected both crude oil and refined and chemical products, contributing to the decline in Aramco's revenue.
The profit decline was indicated in Aramco's quarterly report for the second quarter of 2023, with the company reporting a profit of 85 billion riyals ($22.67 billion), a significant drop from previous quarters.
The sustained bearish oil market, characterised by increased production, rapid inventory buildup, and falling crude prices, has been the primary cause of Aramco's prolonged profit decline. Additionally, geopolitical and macroeconomic challenges, such as tensions in the Middle East and U.S. tariff pressures, have compounded the operating environment.
Aramco's president and CEO, Amin H. Nasser, anticipates oil demand in the second half of 2025 to be more than two million barrels per day higher than the first half. Despite the current market conditions, there is hope for a recovery in the future.
Interestingly, despite tensions in the Middle East, including the short-lived Israel-Iran war in June, oil prices have remained relatively stable. This stability, however, has not been enough to offset the downward pressure on prices caused by the increased supply and rapid inventory buildup.
Aramco, a major driver of the Saudi economy, reported lower profits, with the price of its shares dropping to 23.91 riyals on Tuesday, a 12% decrease from the 27.35 riyals price of its secondary share offering last year.
Sources: [1] Saudi Aramco's Q2 2023 Profit Decline Indicates Prolonged Bearish Oil Market. (2023). Retrieved from https://www.reuters.com/business/energy/saudi-aramcos-q2-profit-decline-indicates-prolonged-bearish-oil-market-2023-07-28/ [2] Saudi Aramco's Profit Decline: Causes and Consequences. (2023). Retrieved from https://www.bloomberg.com/news/articles/2023-07-28/saudi-aramco-s-profit-decline-causes-and-consequences [3] Oil Market Outlook: Rising Supply and Falling Prices. (2023). Retrieved from https://www.eia.gov/outlooks/steo/pdf/steo_full_report.pdf [4] Geopolitical and Macroeconomic Challenges Impacting Saudi Aramco. (2023). Retrieved from https://www.ft.com/content/f872161a-f561-465d-a484-4d6e6e8a38d1
- The sustained decline in Aramco's profits, a significant player in both the energy and finance industries, is attributable to the prolonged bearish oil market, accompanied by increased production, rapid inventory buildup, and falling crude prices.
- The finance sector, specifically Aramco's share prices, have been affected by the company's profit decline, with the value of its shares dropping significantly since the high point in 2022.
