Saudi state oil company Aramco has recorded a 19% fall in net income for Q1 2019 as oil prices dropped. The company earned $31.9bn in the period, down from $39.5bn the previous year; however, this was above forecasts from a poll of analysts made earlier in the year, which had set the figure at $30.5bn. Aramco, the world’s largest oil exporter, posted its net profit up by 3.75% from Q4 and revealed a cash flow from operating activities of $39.6bn and free cash flow of $30.9bn, both of which were slightly up on the previous year. Shares rose 3.2% in early deals in Riyadh Tuesday.
Despite the reduction in net income, Aramco CEO Amin Nasser stressed the importance of hydrocarbons to the world’s energy needs, saying: “We believe oil and gas will remain critical components of the global energy mix for the foreseeable future.” He added that “We are leveraging cutting-edge technologies to increase liquids-to-chemicals capacity and meet anticipated demand for petrochemical products.” Aramco posted a record net income of $161.1bn for 2018 in March, up by 46.5% over the year.
Nasser said the company is “moving forward” with capacity expansion and that its “long-term outlook remains unchanged.” However, Aramco’s Basic Industries Corporation (SABIC), one of the world’s largest petrochemical companies in which Aramco owns a 70% stake, this month saw its Q1 net profit plunge 90% and warned that margins would remain under pressure amid new capacities, rising interest rates and uncertainty over global growth.
Prices for oil and gas prices rose at the start of 2019, moving up due to Western sanctions on Russia following its full-scale invasion of Ukraine. However, this has failed to last, and prices have since fallen. The price of international oil benchmark Brent crude is down 9% year to date and down more than 17% year on year. The decrease is due to anti-inflationary measures taken by both the US Federal Reserve and the European Central Bank, which have resulted in lackluster demand growth for most of the OECD, with recession risks lying ahead, according to Citi’s global head of commodities research, Ed Morse.
