Saudi Aramco yearly profits down 20.6 percent

Monday, 16 Mar, 2020

Price War The Crown Prince's push for control of global crude markets brings into stark relief how he's using the world's most profitable company as a policy lever, while minority shareholders are left to look on. The low price extended to $30.33. The collapse of the so-called OPEC-Plus deal this month ended a three-year agreement that propped up oil prices.

The UAE, home to Abu Dhabi and Dubai, meanwhile said it would stand ready to increase production to 4 million barrels of crude a day, up from the 3 million it now pumps. A rally beyond that seems unlikely as long as demand conditions remain subdued due to the coronavirus impact. The worldwide Brent benchmark had fallen from $69 at the start of the year to around $50 last week.

"I don't see how you can use the SPR", he said.

The company produced 13.2 million barrels of oil equivalent per day (boed) previous year versus 13.6 boed produced in 2018.

Now the government expects oil supply to exceed demand by about 970,000 barrels a day this year.

Eurasia Group said that the price war will, meanwhile, exert pressure on US crude exports, which recently hit a record 4 million barrels per day, because they will struggle to get their cargoes to clients at profit. But the Russians balked. "Rosneft has always been baulking at production cuts". "We could see them reallocate some of the investment away from downstream projects to focus on boosting production".

"We're going to fill it right up to the top - saving the American taxpayer billions and billions of dollars, helping our oil industry", Trump said on Friday.

The price war, likely to weaken Aramco's 2020 first quarter earnings, was triggered by Russia's refusal to agree on additional output cuts to support prices dented by the coronavirus outbreak.

A Reuters survey showed analysts slashed their forecasts of Brent crude prices to $42 a barrel on average in 2020, compared to the $60.63 consensus in a February poll. According to reports, the country needs oil to be at around $80 a barrel to be able to balance its budget. Russia's anger over sanctions targeted at its oil giant, Rosneft Trading. "The Russians are doing this out of long-term strategic considerations", said Tom Adshead, research director for the Macro-Advisory consulting firm in Moscow.

Today, the United States remains the world's largest producer.

"The recent COVID-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape", president and CEO Amin Nasser said in a statement alongside Aramco's 2019 financial results.

Oil prices rose sharply early on in the session, rebounding from recent losses amid hopes the USA government would pass a coronavirus economic aid package.

"The OPEC really sustained the prices", the expert says, stressing that the cartel feared a repetition of the 2014-2015 scenario, when there was "a severe pressure on investors and the government, and it was Daesh* that was used as an instrument". It has a foreign reserve of US$500 billion, meaning it is prepared for the price war.

An oil and gas industry group welcomed Trump's directive.

"With the growth phase of the shale boom grinding to a halt due to the lack of investment in the industry, now United States shale oil could find itself running into a brick wall", says Innes from AxiCorp. He warned countries against being rash with big production decisions: "This is not a Russian roulette".

In its results, Aramco blamed lower crude oil prices and declining margins for its chemical sales for lowering profits.

"The major oil powers of Russia, Saudi Arabia, and the USA are now engaged in a test of their oil economics and energy dominance", the CME said.

Oil prices have moved-off low, still defending gains amid risk-on market mood. Saudi Arabia has plans to increase crude shipments to Asia, selling at discounted rates as part of its oil war strategy.

Now other producers, traders, the LNG sector, gas in the USA, and even thermal coal miners and exporters, face a long period of dislocation around the world from the battle for supremacy in oil.

By contrast, Saudi Arabia has actually vowed to raise output by 2.6 m bpd in April.

The Saudi retaliation of a threated boost, rather than cut, to its own production has sent prices into a tailspin.