Saudi Aramco reported a 9% rise in third-quarter profit to $31.2 billion, driven by a 35% increase in the average selling price of its oil, even as the company faced repeated attacks from Yemen's Houthis and Iranian strikes on ships in the Strait of Hormuz.
The oil giant also increased its dividend payments, most of which go to the Saudi state, as higher crude prices more than made up for lower output. Despite Aramco’s ability to export oil at higher prices, its stock has lagged global majors that mostly operate outside the Gulf.
Aramco's production, though lower than before the war in the region, rose from the previous quarter. The company has embraced more risky ship-to-ship transfers to get crude out through the Strait of Hormuz and boosted shipments through the Red Sea. CEO Amin Nasser said on an earnings call that the firm is looking to maximize production through the end of the year by “utilizing all the routes that we have.” He added that Aramco sees buoyant demand lasting for several years.
Nasser also said that even if the Iran war were resolved today, it could take two years to refill depleted global oil storage reserves.
Analysis
Why This Matters
- The profit surge bolsters Saudi state finances, which rely heavily on Aramco dividends, amid geopolitical tensions that could disrupt global oil supply and prices.
- Higher oil prices persist even with reduced production, underscoring market tightness and the lasting effect of conflicts in the Gulf on energy security.
- CEO's comment on a two-year timeline to refill storage reserves indicates that risks to supply will keep markets volatile for an extended period.
Background
Aramco is the world's largest oil exporting company, and its production and pricing influence global energy markets. The third-quarter profit came against a backdrop of repeated Houthi attacks on its facilities from Yemen and Iranian strikes on ships passing through the Strait of Hormuz, a critical chokepoint for oil tankers. The conflict in the region has led Aramco to adopt riskier shipment methods to maintain exports.
What to Watch
- Whether Aramco can sustain higher production and exports through riskier shipping routes without a major incident.
- How long the current elevated oil price environment, which the CEO expects to last several years, will persist.
- The timeline for rebuilding global oil storage reserves once regional conflicts ease, as indicated by Nasser's two-year estimate.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedSaudi Aramco’s third-quarter profit rose 9% to $31.2 billion.Semafor: “Saudi Aramco reported a 9% rise in profit and increased dividend payments, most of which go to the Saudi state, as a jump in crude prices more than made up for lower production. Profit rose to $31.2 billion in the third quarter”
- SupportedThe profit rise was driven by a 35% increase in the average selling price of Aramco’s oil.Semafor: “driven by a 35% increase in the average selling price of its oil”
- SupportedAramco faced repeated attacks on its facilities from Yemen’s Houthis.Semafor: “even as the company tackled repeated attacks on its facilities from Yemen’s Houthis”
- SupportedIranian strikes hit ships passing through the Strait of Hormuz.Semafor: “and Iranian strikes on ships passing through the Strait of Hormuz.”
- SupportedMost of Aramco’s increased dividend payments go to the Saudi state.Semafor: “increased dividend payments, most of which go to the Saudi state”
- SupportedHigher crude prices more than made up for lower production.Semafor: “as a jump in crude prices more than made up for lower production.”
- SupportedAramco’s stock has lagged global majors that mostly operate outside the Gulf.Semafor: “its stock has lagged the global majors that mostly operate outside the Gulf.”
- SupportedAramco’s production was below prewar levels but higher than the previous quarter.Semafor: “Although lower than prewar levels, Aramco reported higher oil production than the previous quarter”
- SupportedAramco used riskier ship-to-ship transfers to get crude out through Hormuz and boosted shipments through the Red Sea.Semafor: “as it embraced more risky ship-to-ship transfers to get crude out through Hormuz and boosted shipments through the Red Sea.”
- SupportedOn an earnings call, CEO Amin Nasser said Aramco was looking to maximize production through year-end by “utilizing all the routes that we have.”Semafor: “Aramco is looking to maximize production through the end of the year, “utilizing all the routes that we have,” and sees buoyant demand lasting for several years, CEO Amin Nasser said on an earnings call.”
- SupportedNasser said Aramco sees buoyant demand lasting for several years.Semafor: “and sees buoyant demand lasting for several years, CEO Amin Nasser said on an earnings call.”
- SupportedNasser said it could take two years to refill depleted global oil storage reserves even if the Iran war were resolved today.Semafor: “It could take two years to refill depleted global oil storage reserves even if the Iran war was resolved today, Nasser said.”
