Saudi Aramco, the state oil giant of Saudi Arabia, has reported a significant 26% increase in its first-quarter profits, reaching $33.6 billion. This surge in earnings is attributed to the effective use of its east-west pipeline, which facilitated the transportation of millions of barrels of oil outside the Gulf region, even amidst ongoing conflicts in the Middle East. The company also experienced a nearly 7% rise in revenue compared to the same period last year, totaling $115.5 billion.
The increase in profits was achieved despite challenges such as attacks on Aramco’s infrastructure and the cessation of exports through Gulf ports. Amin Nasser, the president and chief executive of Aramco, emphasized the crucial role of the east-west pipeline, which operates at its full capacity of 7 million barrels per day. This pipeline has been instrumental in mitigating the effects of a global energy shock and alleviating the difficulties faced by customers due to shipping constraints in the Strait of Hormuz.
The strategic pipeline allows Aramco to transport oil from its eastern facilities to the Red Sea port of Yanbu, circumventing the Strait of Hormuz. The strait, which is a vital passageway for around 20% of the world’s oil and gas supply, has effectively been closed since late February due to the US-Iran conflict. This disruption has led to a spike in global energy prices, with Brent crude oil trading at approximately $100 per barrel, marking a 40% increase from pre-conflict levels.
Nasser has previously cautioned that the prolonged closure of the Strait of Hormuz would be disastrous for global oil markets, and he reiterated that it would take months for the market to stabilize even if the strait were to reopen immediately. In a statement, he indicated that if trade resumes through the strait promptly, the oil market could rebalance within a few months. However, should the trade and shipping constraints persist beyond a few weeks, the supply disruption could continue, potentially normalizing only by 2027.
As tensions continue, the United States is waiting for a response from Iran regarding its proposals for a temporary agreement to end the conflict. Recent skirmishes around the strait have followed President Donald Trump’s announcement, and subsequent pause, of a naval mission intended to reopen the waterway. Despite these geopolitical challenges, Aramco has announced that it will maintain its quarterly dividend at $21.9 billion, following a 3.5% increase in the payout at the end of the previous year.