Saudi state oil company Aramco (2222.SR) saw its first quarter profit fall by a quarter in the first three months of 2020, blaming collapsing oil prices caused by the COVID-19 pandemic.
Saudi Aramco said on Tuesday it made a net profit of $16.7bn (£13.5bn) in the first three months of 2020, compared to $22.2bn a year earlier.
The decline mirrored a slump in oil prices since the start of the year. The price of Brent crude (BZ=F) has collapsed by 50% since the start of the year. Global lockdowns and travel bans have depressed demand for fuel and led to massive oversupply of oil.
“The COVID-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a highly complex and rapidly changing business environment,” Aramco president and chief executive Amin H. Nasser said in a statement.
“We have delivered solid earnings with robust free cash flow, despite weak energy demand and low oil prices.”
Nasser warned the pandemic was likely to “weigh on our earnings” for the remainder of the year but said: “Longer term we remain confident that demand for energy will rebound as global economies recover.”
Saudi Aramco is 98% owned by the Saudi state and forms the country’s main source of income. Aramco’s slump in profits, combined with other economic shocks linked to COVID-19, has placed significant pressure on the Middle Eastern Kingdom’s finances. Saudi Arabia said on Monday it would triple VAT and cut spending as it looks to balance its books.
Saudi Arabia also pledged to cut its oil output by an additional one million barrels per day in a bid to shore up prices. However, the announcement on Monday did little to boost oil.
“There remains worries that the cut is further proof that global demand is going to be poor for longer than markets may have been pricing,” Jim Reid, a strategist at Deutsche Bank, wrote in a note to clients sent on Tuesday.