Saudi Aramco hits fresh profit record as high energy prices deliver windfall

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Saudi Aramco has broken its quarterly profit record set in May, as soaring energy prices driven by Russia’s invasion of Ukraine deliver windfalls to oil producers.

But the state-controlled company’s chief executive warned that spare capacity remained limited as demand was increasing, with pandemic restrictions expected to ease in China, the world’s second-largest oil consumer.

Net income rose to $48.4bn in the second quarter, a 90 per cent year-on-year increase and the group’s highest earnings since listing in 2019.

The Saudi oil company kept its dividend unchanged at $18.8bn for the third quarter as it worked to expand oil and gas production. The company said it had limited production capacity to increase output and by 2025 would hit 12.3mn barrels per day.

“While global market volatility and economic uncertainty remain, events during the first half of this year support our view that ongoing investment in our industry is essential,” said Amin Nasser, Saudi Aramco’s chief executive.

Western countries have pushed Saudi Arabia, the de facto leader of Opec, to increase production to offset rising prices, but the kingdom has said it would do so only if demand increased.

Nasser told reporters on Sunday that demand was “healthy” but warned there was little excess capacity after a period of low investment in the industry.

“With the Covid restrictions in China easing up, that will add to the demand . . . the aviation industry will also add to the demand,” he said.

Saudi Arabia, the world’s largest oil exporter, has a production capacity of 12mn b/d, a figure that Saudi Aramco could quickly reach if instructed by the government, said Nasser. The company’s capital expenditure increased 8 per cent to $16.9bn in the first half of the year compared with the same period in 2021, and would gradually increase up until 2025, he added.

The world’s biggest listed oil producers, including ExxonMobil, Chevron and BP, have all posted huge earnings after a surge in commodity prices fuelled by the Ukraine war and a rebound in post-pandemic demand. Most have boosted shareholder payouts.

The high profits are putting increasing political pressure on the oil majors, as high energy prices threaten to spark public blowback. US President Joe Biden said in June that Exxon was making “more money than God”.

Brent crude, the international benchmark, has dropped from $120 a barrel in June to near $98 on Friday. Saudi Aramco’s shares, which are listed in Riyadh, have risen more than 25 per cent this year. The government listed 1.7 per cent of the oil firm’s shares in 2019.

Responding to US and western pressure for an increase in oil production, Opec has warned of the “severely limited availability of excess capacity” after years of under-investment throughout the industry.

Nasser said it would take years to “bring solid additional capacity”.

He added: “We are deeply concerned about the lack of investment; even now with higher prices, you only see short-term investment in the market.”

Earlier this month, Opec and its allies agreed to one of the smallest oil production increases in the group’s history, with Saudi Arabia working to appease its western allies without using up its unused capacity.

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