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The net profit of Saudi Aramco oil company in the first quarter of the year fell by 25 percent due to lower crude prices. The company's profits were damaged by what was known as the price war with Russia and then the global health crisis caused by the Corona virus. The company expects that the decline in global demand for crude will affect the remainder of the year 2020. Despite this situation, "the company remains confident of the growing demand for energy with the recovery of global economies ... in the long term." </p><div> <p>Revenue was damaged <strong>Aramco oil</strong> Saudi Arabia largely due to the health crisis in the world. The giant announced Tuesday that its net profit in the first quarter of the year fell 25 percent due to lower crude prices.
Aramco was listed on the local financial market, Tadawul, last December after it sold 1.5 percent of its shares, in the largest IPO in history, ranging from $ 25.6 to $ 29.44 billion.
Since its incorporation, the company has faced major challenges in global markets, with crude losing about two-thirds of its value last March, while the spread of the Corona virus has caused air closures and curfews around the world.
Oil fell again in April and Texas crude fell to the red for the first time in history after producers had to pay buyers to dispose of large quantities in the absence of sufficient storage sites.
Aramco President: “We must adapt to these developments”
“The entire world has not witnessed a crisis comparable to the pandemic of the emerging Corona Virus (COFD-19),” Aramco President Amin Al-Nasser said in a report on the company’s performance in the first quarter, saying that “we must adapt to these very complex and changing developments at a rapid pace.”
The company expects that the decline in global demand for crude will affect the remainder of the year 2020.
“Looking at the remaining months of 2020, we expect the Corona pandemic to affect global demand for energy and oil prices, which will in turn reflect on the company’s revenues,” Al-Nasser said, but stated that “in the long run, the company remains confident of the growing demand for energy with a recovery World economies. ”
The group said that its net profit amounted to 62.5 billion riyals (16.66 billion dollars) in the first three months of the year, compared to 22.2 billion dollars in the same period last year.
The pandemic and price war with Moscow negatively affect the company’s revenues
Oil prices fell to their lowest levels in two decades in March, after losing about two thirds of their value due to weak demand due to the closure measures related to the emerging Corona virus.
Prices fell again in April in the midst of a price war between Saudi Arabia and Russia to secure the largest market share before producing countries reached a deal to cut production by about 9.7 million barrels with the aim of trying to strike a balance between supply and demand in the market to raise prices.
During the price war between Riyadh and Moscow, Saudi Arabia’s production reached a record level of 12.3 million barrels, before declining to 8.5 in May, due to an agreement to reduce production.
The kingdom plans to cut production again in June to 7.5 million barrels per day, the lowest in nearly two decades, in an attempt to raise prices by relieving pressure on stocks at a stage of weak demand, the Ministry of Energy announced Monday.
The daily production rate in the first three months of this year was 9,7 million barrels under a previous agreement to cut production, the duration of which expired at the beginning of April.
Almost all the major oil companies recorded losses in the first quarter of 2020, but Aramco is focusing on the low cost of production to generate profits. Nevertheless, the group said, it implemented “additional measures to improve spending, which reduced the expected capital expenditures for 2020”.
And it expects that the size of its capital expenditures for the fiscal year 2020 will range between 25 and 30 billion dollars, compared to 32.8 billion dollars in 2019.
Aramco shares decline in value
Aramco’s share price jumped at the start of its listing by 10 percent, and then continued its rise before falling in recent weeks, affected by the decline in demand, and it fell below the listing price of 32 riyals.
The share price at the beginning of trading on Tuesday was 31.05 riyals, or 3 percent less than the listing price. The company is currently valued at $ 1.66 trillion, which is well below the $ 2 trillion level that the young crown prince, Mohammed bin Salman, the de facto ruler of the kingdom, had aspired to.
The IPO of the world’s most profitable company is the cornerstone of the crown prince’s economic reform program called “Vision 2030”, which seeks to attract tens of billions of dollars to finance massive projects aimed at diversifying the oil-dependent economy.
Since its establishment in the Dhahran region, the company has grown to become the largest and most profitable energy company in the world, providing 10% of oil supplies globally and returning to the conservative kingdom of trillions of dollars.
But the decline in demand and falling prices began to cast a shadow over the Saudi economy, the largest in the Arab region, especially in light of the Kingdom’s suspension of the Umrah rituals that generate millions of dollars annually, stopping flights and imposing curfews in some areas.
On Monday, the kingdom decided to raise the value-added tax rate from 5 to 15 percent as part of new austerity measures imposed by measures to limit the spread of the virus.
France 24 / AFP