almost 4 years ago • 2 mins
Saudi Aramco – the biggest company in the world – saw its first-quarter profit drop 25% on Tuesday, as the one-two punch of collapsing oil prices and falling demand battered the Saudi oil giant’s sales 🥊
Aramco’s first-quarter earnings came in below expectations, but the worst may be yet to come. It was only in April, after all, that oil prices hit a 34-year low, suggesting the impact will probably be even more pronounced next quarter. And that may be why Aramco’s decided to slash its 2020 spending by 25%.
Fortunately for Saudi Arabia, the oil giant didn’t do the same to its dividend. The Kingdom – which owns around 98% of Aramco – relies heavily on those payouts to cover its spending. So if they vanish – and the oil price collapse continues to wreak havoc on the country’s finances – the austerity measures announced on Monday could be just the beginning… 🤔
Big Oil’s generous dividends have long been a key attraction for investors, but they’re increasingly under threat. Exxon Mobil, for one, recently froze its payouts, while Shell’s were slashed by two-thirds. So investors might just be relieved Aramco held its ground. Then again, other oil majors aren’t under their governments’ thumbs like Aramco is: Saudi Arabia insisted in March that the state-owned company pump at maximum capacity, only to ask it to cut production by more than 40% two months later 🛢
It’s not just Saudi Arabia feeling the heat: Norway, western Europe’s largest oil exporter, is facing its worst economic slump since World War II due to the collapse in oil price and demand 🇳🇴 The country revealed on Tuesday that it’s withdrawing a record $37 billion from its gigantic investment fund. That would, in turn, force the fund – the biggest in the world – to sell a significant chunk of its bond holdings, which could add pressure to global bond markets.
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