A national day on an international stage
Last year’s Saudi National Day came just 10 days after the attacks on the Kingdom’s oil production in Abqaiq and Khurais. In that time, oil production had been restored and the attempt to cripple the world’s largest oil processing facility instead became a symbol of the country’s resilience in the face of adversity.
Fast forward a year and the Kingdom’s national day again coincides with a period of adversity, though this time shared by the world at large.
Once again the Kingdom is demonstrating its resilience amid an unprecedented downturn in global oil demand caused by the coronavirus.
During this 90th national day celebration, Saudi Arabia is chairing the G20 in what is a critical crossroads for the global economy.
While the pandemic prevented physical gatherings from taking place, the Kingdom continued to steward the virtual meetings of world leaders and helped to galvanize action to curb the impact of the virus and rebalance an energy market that had been badly hurt by falling demand at a time of copious supply.
The speed with which a deal was reached was, in part, an acknowledgment of confidence among other countries in the Saudi vision for restoring order to the energy market.
That entailed orchestrating the largest oil output cuts in history, with 20 producers from inside and outside OPEC, in order to contain the largest oil demand shock the world has ever seen. This unique pact between OPEC and other producers outside the group — now in its fourth year — has kept oil markets on an even keel despite the most ferocious of headwinds.
Saudi Arabia’s national oil company, Saudi Aramco, remains the most profitable among its peers, while many other companies in the sector have had a much tougher time in adjusting to what has become known as “the new normal.”
For the wider oil industry, the second quarter was unsurprisingly much worse than the first, and the steep losses incurred by oil companies does not bode well for future investment in key energy infrastructure as they slash expenditure across operations and exploration.
Weaker oil prices that fell to historic lows in April and similarly weak refining margins have resulted in losses for many industry titans, but not, it is worth noting, for Saudi Aramco which managed to achieve a net income that exceeded the profit of the five major international oil companies combined. It will also make good on its dividend commitment to shareholders despite the extraordinary events of recent months.
Beyond the oil sector, the Saudi Public Investment Fund (PIF) has also prospered and seized on new opportunities across a number of sectors and industries helping it to increase its global profile.
During the pandemic, its assets jumped to some $390 billion compared with about $360 billion last August. This takes it a step closer to fulfilling its Saudi Vision 2030 target of $400 billion by the end of 2020.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq.