Saudi Arabia’s energy giant Aramco reported 44.21 billion riyals ($11.79) in net profit for the third quarter of 2020 on Tuesday, a 44.6 percent drop from the same quarter in 2019 as the coronavirus pandemic caused unprecedented upset in oil markets this year.
COVID-19 has hit oil markets hard, with prices tumbling dramatically as governments ordered nationwide lockdowns, stymying demand for petroleum products as customers stayed home. Saudi Aramco, the world’s largest and lowest-cost producer and most valuable company, has likewise been affected by this demand drop.
While net income for the third quarter represented a significant drop year-on-year, it also represented a 79.6 percent increase on the second quarter of 2020 as demand for oil has slowly returned.
“The increase primarily reflects the impact of higher crude oil prices, partly offset by a decrease in crude oil volumes sold, as well as an increase in income taxes and zakat mainly due to higher earnings for the third quarter,” the company said.
For the first nine months of 2020, Aramco reported 131.31 billion riyals ($35.02 billion) in net income, a 48.6 percent decrease compared to the first nine months of 2019.
Earlier this year, the Organization of Petroleum Exporting Countries (OPEC) and its partners, forming the OPEC+ group, sealed a historic output cut deal in a bid to support oil prices. The deal, led by Saudi Arabia, cut 9.7 million barrels per day, or around 10 percent of global supply, from markets.
However, as low oil prices struck oil firms’ bottom lines hard, many responded by cutting capital expenditure (CAPEX) investments planned for 2020, meaning that a future shortage in oil production may be possible. In this case, oil prices may rise suddenly as demand returns but output does not grow.
One expert previously told Al Arabiya that this shortage could be creating an energy crisis, with the global economy set to suffer – particularly troubling given that the coronavirus pandemic is already causing the greatest recession the world has seen in nearly a century.