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Oil giant, Aramco, Manifests Dire Situation of the Sector

The national oil company of Saudi Arabia, known as Saudi Aramco or simply Aramco, has reported quite negative financial results in the third quarter of 2020. In its report, the Saudi giant declared that its profit for the third quarter of 2020 was 44.21 thousand million Saudi riyals ($11.79 billion). It represented a sharp drop of 44% from the 79.84 billion riyals it earned in Q3 2019.

The latest data released by Aramco shows a very sharp contrast to the continued optimism OPEC + maintained. The group believes that markets are recovering slightly. The truth is that the Saudi giant, the Aramco company, still valued at about $2 trillion, is still fighting a tough battle against the continued collapse of the market and the fall in demand caused by the coronavirus pandemic. For the last quarter of 2020 and the first half of 2021, even worse results can be expected. Especially, as oil prices reflect an increasingly negative sentiment in the market. The uncertainty about the impact that the quarantine imposed on countries will result in a drop in demand.

Iran may introduce oil and gas into the markets again

Besides, a possible victory in the presidential elections of the United States of the Democratic candidate Joe Biden could aggravate the situation in the sector. According to some analysts, it would allow Iran to introduce oil and gas into the markets again.

Aramco has also indicated that government-approved changes to the rates the company pays have helped improve the published figures. What has happened is that after the fall in prices and sales volumes, the government decided to reduce the fees it charges for producing oil. This measure has partially offset the losses. Aramco therefore benefited from a reduction in production rates from 20% to 15%. As well as, other fiscal aids such as reduced income taxes.

The oil giant has also been able to increase revenues due to improved sales of natural gas and its derivatives. Total hydrocarbon production for the third quarter was 12.4 million barrels of oil per day. Crude oil represented 9.2 million barrels per day.

The company’s general financial indicators have also improved thanks to the fall in CapEx, which now stands at $6.4 billion. 

If we take into account the problems that COVID-19 is causing on the world oil and gas market, it’s too early to be optimistic. 

OPEC + has to reassess the situation taking into account the fall in prices. Besides, there is a possibility that oil reserves will saturate around the world again. 

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