Profit dives at world's largest oil company but 'signs of recovery'

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2 min read
A gas station attendant refills a car at a station in the Saudi capital Riyadh on May 11, 2020. - Saudi Arabia's energy ministry said it had asked oil giant Aramco to make an additional voluntary output cut of one million barrels per day starting from June to support prices. The move will reduce the production of the world's biggest crude exporter to 7.5 million barrels per day, the energy ministry said in a statement cited by the official Saudi Press Agency. (Photo by RANIA SANJAR / AFP) (Photo by RANIA SANJAR/AFP via Getty Images)
A gas station attendant refills a car at a station in the Saudi capital Riyadh on May 11, 2020. Photo: RANIA SANJAR/AFP via Getty Images

Saudi Aramco (2222.SR), the world’s largest oil company, has reported plummeting profits as the COVID-19 pandemic leads to collapsing demand for oil.

Net income at the Saudi state-owned oil company was $11.8bn (£9.1bn) in the third quarter, Aramco said on Tuesday, 44% lower than the same period a year earlier.

Aramco declared a dividend of $18.7bn for the quarter, up 40% of last year. The increase reflects the company’s commitment to shareholder payouts and the price of attracting investor interest in tough market conditions.

The price of oil (BZ=F, CL=F) has fallen by more than 35% since the start of the year as the pandemic has led to plummeting demand for fuel.

Crude oil price YTD. Chart: Yahoo Finance
Crude oil price YTD. Chart: Yahoo Finance

Global stay at home orders and restrictions on international travel have suppressed mobility both within and between countries.

Saudi Aramco’s profits are down by half in the first nine months of the year, reflecting lower demand.

Amin H. Nasser, president and chief executive of Saudi Aramco, said there were “early signs of a recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets.”

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Aramco’s third quarter results cover the three months to 30 September. Since then, a wave of second lockdowns have swept Europe as COVID-19 cases have once again begun to rise sharply.

Nasser made no mention of the pandemic’s second wave but analysts believe it will once again suppress oil demand. JP Morgan last week cut its forecast for global oil demand in November.

The investment bank now believes the world will consume 94.2 million barrels of oil per day — 6.7% less than it was a year ago. Oil prices fell by 4% on Monday morning, reflecting investor concerns.

Shares in Aramco were up 0.4% in Riyadh on Tuesday, trading at the same levels they were at in January.

Saudi Aramco shares YTD. Chart: Yahoo Finance
Saudi Aramco shares YTD. Chart: Yahoo Finance