Is OPEC responsible for Aramco’s lower dividends?

Saudi Aramco announced that it expects to declare total dividends of $85.4 billion in 2025, down from $124.2 billion in 2024. This decrease follows a 12 percent decline in net income, from $121.3 billion in 2023 to $106.2 billion in 2024. This is because average oil prices remained nearly the same between 2023 and 2024. Thus, Aramco’s lower dividends are mainly due to a drop in average oil production from 9.6 million barrels per day (bpd) in 2023 to approximately 8.9 million bpd in 2024.

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At current production levels of approximately 9 million bpd, Saudi Arabia still has approximately 3 million bpd of additional production capacity. This will help the Saudi economy, as oil exports remain a major source of revenue. The Kingdom is the world’s largest oil exporter, and its oil is characterized as base load crude. Very Large Crude-Oil Carriers (VLCC) are used for full-capacity loading, not for partial co-loading.

Increasing oil production leads to increased export volumes, which boosts national income and supports the government budget, which is still heavily dependent on oil revenues. While diversifying Saudi Arabia’s economy is crucial for sustainable growth, higher revenues would strengthen support for major investment projects.

Are OPEC production quotas the main reason for Aramco’s reduced dividends?

Attributing Aramco’s reduced dividends solely to OPEC’s production restrictions oversimplifies a complex economic and strategic reality. While it is true that Saudi Arabia has the largest spare oil production capacity globally and the largest producer among OPEC members, claiming that Saudi Arabia should maximize its production at the expense of OPEC’s broader strategy may ignore long-term economic, geopolitical, and strategic considerations. Saudi Arabia’s oil strategy is a long-term strategic vision that goes beyond OPEC’s production ceiling quotas.

The real impact of oil production levels, not price levels

Aramco’s dividend cut is primarily driven by two factors: lower oil prices and reduced production. However, the biggest reason for the recent decline in revenues, when comparing price levels in 2023 and 2024, is not the price of oil itself. Average prices were very close between 2023 and 2024, but production levels were approximately 600,000 bpd lower, which is more than the actual production level of some OPEC members.

Some argue that if Saudi Arabia unilaterally increased production, it would push prices down, potentially offsetting any revenue gains.

In other words, increased production does not necessarily mean increased income; rather, it could mean selling more barrels at lower prices, reducing overall profitability. This argument might be consistent with production quotas imposed by other OPEC members, but not with the large restrictions of approximately 3 million bpd.
Increasing Saudi oil production could be profitable even if sold below market prices

Although the global oil market is highly sensitive to the balance of supply and demand, OPEC’s influence has always been linked to the market strength of Saudi Arabia. Saudi Arabia has historically played a leading role in the oil market, bearing the burden of adjusting production to balance supply and demand and stabilize global economy. On the other hand, the United States is striving to increase its production without any restrictions to 16 million bpd and will flood the market consequently if it succeeds in expanding its export infrastructure to keep pace with this increase.

Saudi Arabia’s long-term strategy go beyond immediate revenue

Blaming OPEC for Aramco’s lower dividends remains a controversial and potentially misleading argument that ignores the broader economic and strategic picture. Price stability and long-term planning are more important than unplanned production increases. Furthermore, Aramco’s dividend structure is designed to strike a balance between short-term payouts and long-term financial health.

Reducing performance-related dividends should be viewed as part of a prudent financial strategy that ensures the company continues to invest in growth areas such as refining, petrochemicals, and renewable energy. These investments will make Aramco better able to meet future shifts in global energy demand.

A balanced approach is the best path

As OPEC’s leading member, Saudi Arabia wields significant influence over global oil market, balancing market stability. Therefore, the right approach is not to abandon OPEC or pursue short-term gains, but rather to continue implementing a wise strategy that maintains global oil market stability, supports financial sustainability, and drives economic diversification in the Kingdom.

The notion that Saudi Arabia should ignore OPEC production quotas and act according to its short-term interests may overlook the broader economic transformation the Kingdom is undertaking. Saudi Vision 2030, an ambitious economic diversification plan, aims to reduce dependence on oil and build a more sustainable economy. Therefore, increasing production at the expense of market stability would conflict with this strategy.

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