Ryad (AFP)

Saudi oil giant Aramco announced a 25% drop in first quarter net profit on Tuesday after a dramatic drop in black gold prices due to the coronavirus crisis, which is expected to further affect demand throughout the year.

In December 2019, Aramco became the largest publicly traded company, raising a record $ 29.4 billion by selling some 1.75% of its shares when it smashed into the Saudi financial markets. But since then, Ryad's economic buoy has been swimming in troubled waters.

The state-owned enterprise posted net profit of 62.5 billion riyals ($ 16.66 billion) in the first three months of 2020, compared to $ 22.2 billion in the first quarter of last year, a said the national flagship of Saudi Arabia, the world's largest exporter of crude oil.

"The Covid-19 crisis is unlike anything the world has experienced in recent history and we are adapting to a very complex and rapidly changing business environment," Aramco CEO said in a statement. Amin Nasser.

According to him, the decline in profits mainly reflects the sharp drop in crude oil prices, as well as the decline in refining margins and petrochemicals.

"For the rest of 2020, we expect the impact of the Covid-19 pandemic on global energy demand and oil prices to weigh on our revenues," added Nasser.

- "Confident" -

The slowdown in economic activity due to the pandemic has caused a cataclysm in the world oil market, also struck by a price war between Saudi Arabia and Russia, respectively the third and second largest producers in the world.

Faced with Moscow's refusal to cut world production, Ryad brutally pushed its own to a record 12.3 million barrels a day. As a result, the price of oil plummeted in March to its lowest level in nearly two decades, losing almost two-thirds of its value.

"In the longer term, we remain confident that demand for energy will rebound as global economies recover," said Nasser.

Aramco plans to continue to cut capital spending, he added, to reach between 25 and 30 billion dollars, against 32.8 billion in 2019.

Aramco’s production increased to 9.7 million barrels per day and then to 8.5 million barrels per day, under an agreement between Saudi Arabia and other exporting countries, including Russia, to decrease production and support prices.

Next June, Aramco will pump 7.5 million barrels per day at the request of the Saudi Ministry of Energy, which announced on Monday a further reduction of one million barrels per day to stabilize the market.

- Austerity plan -

Based in the city of Dahran (east), the petroleum manager employs around 80,000 people. Since the start of the year, Aramco shares have fallen 12%.

It is not the first time that it has suffered the blow in the face of falling prices on world markets. The juggernaut recorded a 20.6% drop in its net profit in 2019, to $ 88.2 billion. In 2018, however, it posted a net profit of 111.1 billion dollars.

Faced with the drop in its oil revenues and the economic crisis linked to the pandemic, Saudi Arabia announced Monday an austerity plan providing for a tripling of the value added tax and the end of the monthly allowances to its citizens.

The kingdom hopes to garner 100 billion riyals (24.61 billion euros) from these measures, which risk displeasing the population.

© 2020 AFP