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Saudi Aramco on Sunday reported a 24.7 percent decline in profits in 2023 compared to the previous year, the result of lower oil prices and production cuts.

The oil giant said in a filing with the Saudi stock market that net income reached 454.7 billion Saudi riyals ($121.25 billion) in 2023, compared to 604.01 billion Saudi riyals ($161.07 billion) in 2022.

"The decrease mainly reflects the impact of lower crude oil prices and lower volumes sold, and weakening refining and chemicals margins," Aramco said.

Russia's invasion of Ukraine in February 2022 prompted oil prices to skyrocket, peaking at more than $130 per barrel that year.

Aramco reported what it described as record profits for 2022, giving the kingdom its first annual budget surplus in nearly a decade.

"In 2023 we achieved our second-highest ever net income. Our resilience and agility contributed to healthy cash flows and high levels of profitability, despite a backdrop of economic headwinds," Aramco CEO Amin H. Nasser said in a statement.

"We also delivered for our shareholders with a 30% year-on-year increase in total dividends paid in 2023," he added.

Last year, oil prices dropped to $85 per barrel, resulting in year-on-year profit drops of 23 percent in the third quarter, 38 percent in the second quarter and 19.25 percent in the first quarter of last year for Aramco.

Prices are expected to rise to around $88 per barrel this year, partially due to global uncertainty driven by Israel's war on Gaza, Riyadh-based firm Jadwa Investment said in a report published in October.

They could reach $90 per barrel by the end of 2024, Jadwa Investment said.

Extended supply cuts

The world's biggest crude oil exporter said last Sunday it was extending its oil supply cuts of one million barrels per day through June.

Riyadh first announced its voluntary cut after an OPEC+ meeting in June 2023.

It followed a decision in April 2023 by several OPEC+ members to slash production voluntarily by more than one million barrels per day (bpd) - a surprise move that briefly buttressed prices but failed to bring about lasting recovery.

Energy sector expert Ibrahim al-Ghitani told AFP that Saudi Arabia "bears the greatest burden of reducing production as it is the largest producer within the (OPEC+) coalition and OPEC".

"If it were not for the OPEC+ policy, oil prices would have been below the level we see today above $80 per barrel, especially amid signs of turmoil in the global economic environment following the coronavirus pandemic, the Ukrainian war, and then the Gaza war," Ghitani said.

The kingdom's daily production is now approximately nine million bpd, far below its reported daily capacity of 12 million bpd.

"Saudi Arabia is trying to hedge against the decline in oil prices in general by diversifying its business portfolio and focusing on gas production, in addition to petrochemicals and foreign expansion," the UAE-based expert added.

Nowadays, Riyadh is focusing more on building a long-term partnership with its largest trading partner China, rather than following Washington.

Why Saudi Arabia is joining the China-led SCO 👇

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The Gulf monarchy's gross domestic product shrank by 0.8 percent in 2023 as a result of the drop in oil revenues, according to its statistics authority.

Under Crown Prince Mohammed bin Salman, the de facto ruler, Saudi Arabia has sought both to open up and diversify its oil-reliant economy, spending heavily on much-hyped projects like a futuristic megacity known as NEOM.

Aramco is the main source of revenue for Prince Mohammed's ambitious economic reform programme known as Vision 2030.

On Thursday, the kingdom said it transferred an additional eight percent Aramco stake to firms owned by the kingdom's Public Investment Fund.

The transfer brought to 16 percent the cumulative shares transferred to the PIF, one of the world's largest sovereign wealth funds, and its subsidiaries.

The stake was worth roughly $164 billion at the company's current market capitalisation, an Aramco media officer told AFP.