Saudi Aramco has announced the world’s biggest dividend amid Saudi Arabia’s widening budget deficit. The oil giant is seeking to ease pressure on its own finances. This follows the decision by OPEC+ to put more oil on the market, creating a strong link between the two developments.
Operating profit slipped 11% year over year, with revenue down 1%. In their commentary, Aramco attributed this decline to lower oil prices and reduced production, which is currently below 9 million barrels per day.
However, the key takeaway from the earnings report is the guidance on dividend payments. Aramco expects the total payout for this year to be around $85 billion, compared to $124 billion last year.
The total payout consists of a base dividend and a performance-linked dividend, which is tied to extra free cash flow. After the 2022 energy crisis, when oil prices spiked, Aramco saw a massive revenue influx and increased its dividend payments.
Now, with oil prices under pressure, the company has guided toward a lower overall payout, which may have implications for the Saudi government as its largest shareholder.
This development aligns with OPEC+โs recent decision to increase oil supply. Starting April 1, an additional 160,000 barrels per day will be introduced to the market.
The decision surprised many analysts, who had expected another postponement. OPEC+ has already delayed this move three times but now plans to gradually restore 2.2 million barrels per day to the market.
Oil prices reacted negatively to this news, reflecting market uncertainty. However, Aramco’s CEO has indicated expectations for record oil demand this year, highlighting the ongoing interplay of these market dynamics.