Now it’s your turn: Saudi Arabia urges other oil producers to join output cuts

Saudi Aramco's Ras Tanura oil refinery and oil terminal in Saudi Arabia. (Reuters/FIle photo)
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Updated 14 May 2020

Now it’s your turn: Saudi Arabia urges other oil producers to join output cuts

  • Saudi energy minister Prince Abdulaziz bin Salman and Russian counterpart Alexander Novak discussed oil market developments
  • OPEC and its allies agreed last month to reduce output by 9.7 million bpd for May and June, a record production cut

DUBAI: Saudi Arabia and Russia on Wednesday pledged to rebalance the global oil market and urged other producers to join them in mitigating the effects of the coronavirus pandemic on energy demand.

The two leading oil countries’ energy ministers, Prince Abdul Aziz bin Salman and Alexander Novak, issued a joint statement commending “the efforts of responsible producers around the world who had willingly adjusted their production out of a sense of shared responsibility.”

Novak also welcomed Saudi Arabia’s new voluntary cut of 1 million barrels of oil per day, on top of the big commitments made at the recent OPEC+ meeting, as “clear evidence of the determined actions that are needed to help expedite the rebalancing of the oil market.”

Kuwait and the UAE responded with smaller cuts of their own, but analysts fear other big producers such as Iraq and Nigeria will not be able to follow that lead.

The ministers said: “Our two nations remain firmly committed to achieving the goal of market stability and expediting the rebalancing of the oil market. We are confident that our partners are fully aligned with our goals and they will comply with the OPEC+ agreement.” 

The ministers also said they were encouraged by “recent signs of improvement in economic and market indicators, especially the growth in oil demand and the ease in concerns about storage limits.”

A new report from OPEC on Wednesday said the recent cuts in output “are expected to expedite market rebalancing, and improve the demand for OPEC crude in 2020.”

Nevertheless, the organization said it expected demand for oil to shrink by more than 9 million barrels per day in 2020, 2.23 million more than last month’s estimate. In response, the price of Brent crude, the global benchmark, dipped below the $30 level.

Crude markets were further spooked by a warning from the main US commodities regulator that oil faced the threat of a further plunge when the contract for June delivery of West Texas Intermediate, the US standard, expires next week. “Negative pricing is a possibility,” the regulator said. WTI was trading around $25 per barrel.

Fatih Birol, director of the International Energy Agency, told a forum organized by Dubai consultancy Gulf Intelligence that more cuts by producers might be needed in 2020, but that it was “too early to write the obituary of shale oil.” US production, savaged by the price falls, could start to come back at around $40 per barrel, he said.


Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.