Aramco Reports 12% Drop in Net Profit for 2024 Amid Weaker Oil Prices

Saudi Arabia’s state-owned oil giant, Aramco, reported a 12% drop in its net profit for 2024, revealing a significant dip from $121.3 billion in 2023 to $106.3 billion. This decline, attributed to weaker oil prices, higher operating costs, and reduced sales income, comes at a time when the Kingdom remains heavily dependent on oil revenue.

Aramco’s realized oil price dropped to $80.2 per barrel in 2024, compared to $83.6 per barrel in 2023. This fall in oil prices, combined with rising operational costs, contributed to the reduced earnings. Despite these financial challenges, Aramco’s CEO, Amin H. Nasser, expressed confidence in the company’s resilience. “Our strong net income and increased base dividend illustrate Aramco’s exceptional resilience,” Nasser stated, highlighting the company's ability to maintain strong financial footing despite the pressures.

In a related development, the OPEC+ alliance of oil-exporting countries, including Saudi Arabia, announced on Tuesday that it would increase oil production starting in April. This move could potentially lower oil prices further, as OPEC+ seeks to adjust to the changing dynamics of global oil supply and demand. In 2023, OPEC+ had cut production to help bolster oil prices.

Despite the drop in Aramco’s earnings, the Saudi economy remains focused on long-term diversification. Oil continues to account for over half of Saudi Arabia's government revenue, as per the International Monetary Fund (IMF). However, Crown Prince Mohammed bin Salman is pushing ahead with large-scale development projects, including the $500 billion NEOM megacity and extensive infrastructure plans for the 2034 FIFA World Cup. These ventures are aimed at reducing the kingdom's dependency on oil and positioning Saudi Arabia for future economic growth.

Aramco’s market value remains robust at $1.74 trillion, ranking it among the world’s most valuable companies. However, like many oil companies, its stock has been affected by the fluctuating oil prices, reflecting the ongoing uncertainty surrounding global oil supply and demand.