Oil giant Saudi Aramco makes US$42b quarterly profit
Oil giant Saudi Aramco on Tuesday reported a US$42.4-billion profit in the third quarter of this year, a 39 per cent bump buoyed by the higher global energy prices that have filled the kingdom’s coffers but helped fuel inflation worldwide.
The oil firm’s profits will help fund the kingdom’s assertive Crown Prince Mohammed bin Salman’s plans for a futuristic city on the Red Sea coast, but also comes as the United States grows increasingly frustrated by higher prices at the pump chewing into American consumer’s wallets.
Those tensions yet again have chilled relations between Riyadh and Washington before the Nov 8 midterm elections.
In a note to investors, the predominantly state-owned Saudi Arabian Oil Company said its average barrel of crude sold for US$101.70 in the third quarter – up from US$72.80 at the same point last year. It’s Aramco’s second-largest quarterly profit in its history, just before its second-quarter results this year saw a profit of US$48.4 billion.
It put its profits so far in 2022 at US$130.3 billion, compared to US$77.6 billion in 2021. It made US$30.4 billion in the third quarter last year.
“While global crude oil prices during this period were affected by continued economic uncertainty, our long-term view is that oil demand will continue to grow for the rest of the decade given the world’s need for more affordable and reliable energy,” Aramco CEO Amin H. Nasser said in a statement.
Aramco will keep its dividend this quarter at US$18.8 billion, the world’s highest.
Benchmark Brent crude traded just shy of US$95 a barrel Tuesday. The sliver of Aramco that the kingdom has put on Riyadh’s Tadawul stock market stood at US$9.29 a share before trading Tuesday – putting its valuation at just over US$2 trillion. Only Apple’s valuation, at US$2.44 trillion, is higher.
Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s cheapest places to produce crude. For every US$10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional US$40 billion a year, according to the Institute of International Finance.
That’s crucial as Prince Mohammed and his father, King Salman, rely on oil revenues to fund the kingdom’s government. The International Monetary Fund puts Saudi Arabia’s break-even price for crude at just under US$80 a barrel. The prince also likely wants to use the high oil prices to help fund his planned US$500 billion futuristic city called Neom on the Red Sea.
OPEC and a loose confederation of other countries led by Russia agreed in early October to cut its production by two million barrels of oil a day, beginning in November.
OPEC, led by Saudi Arabia, has insisted its decision came from concerns about the global economy. Analysts in the US and Europe warn a recession looms in the West from inflation and subsequent interest rate hikes, as well as food and oil supplies being affected by Russia’s war on Ukraine.
In Washington, anger has grown with Saudi Arabia, particularly from US President Joe Biden, who travelled to the kingdom in July and shared a fist bump with Crown Prince Mohammed. That’s even after he called the kingdom “a pariah” over Saudi security forces killing Washington Post columnist Jamal Khashoggi in 2018 – a slaying American intelligence agencies believe came at the crown prince’s orders.
Biden recently warned the kingdom that “there’s going to be some consequences for what they’ve done” as a gallon of regular gasolene costs on average US$3.75. Gasolene prices often rank among the top concerns for American voters.
Saudi Arabia lashed back, publicly claiming the Biden administration sought a one-month delay in the OPEC cuts that could have helped reduce the risk of a spike in gas prices ahead of the US midterm elections.
Biden on Monday separately accused oil companies of “war profiteering” as he raised the possibility of imposing a windfall tax on American energy companies if they don’t boost domestic production.
Published: 02-11-2022
