Saudi Aramco, the world’s largest oil producer, has reported a 5% year-on-year dip in its first-quarter net profit, reflecting the ongoing challenges posed by declining crude prices and sluggish global demand. The state-owned oil giant posted a net income of $26 billion for the first three months of 2025, down from $27.3 billion during the same period last year. Despite the drop, the figure slightly surpassed analyst expectations of $25.3 billion.
The company’s free cash flow for the quarter also declined to $19.2 billion, compared to $22.8 billion in the first quarter of 2024. Meanwhile, cash flow from operating activities fell to $31.7 billion, down from $33.6 billion a year earlier.
Aramco CEO Amin Nasser attributed these results to the volatile energy market, stating, “Global trade dynamics affected energy markets in the first quarter of 2025, with economic uncertainty impacting oil prices. In this context, Aramco’s robust financial performance once again demonstrated the company’s unique scale, its reliability and flexibility, and the value of its low-cost operations.”
Dividend Cuts and Financial Strain
In an effort to shore up its financial position, Aramco has implemented significant cuts to its performance-linked dividend payouts. For the first quarter of 2025, the company announced a payout of $200 million, a sharp drop from the $10.2 billion distributed in the fourth quarter of 2024. This reduction follows a similar dividend cut announced in March for the final quarter of last year.
While the base dividend (excluding performance-linked payouts) increased by 4.2% year-on-year to $21.1 billion, the total dividend payout fell dramatically from $31 billion in the same quarter last year to $21.36 billion.
Nasser emphasized Aramco’s focus on disciplined capital planning, adding, “In volatile times, Aramco’s resilience underpins both our financial performance and our sustainable and progressive base dividend.”
Bearish Outlook for Oil Prices
The decline in Aramco’s profit comes as oil markets face bearish conditions, with prices expected to remain under pressure throughout the year. The U.S. Energy Information Administration (EIA) predicts that Brent crude will average $65.85 per barrel in 2025, while Morgan Stanley recently revised its forecast to $62.50 per barrel for the second half of the year.
The weak demand outlook and oversupply concerns have led to OPEC+ members, including Saudi Arabia, adjusting their production strategies. In early May, the alliance announced a production target increase of 411,000 barrels per day for June, following a surprise acceleration in April to unwind voluntary cuts.
Despite these measures, analysts expect Saudi Arabia to face significant fiscal challenges. The International Monetary Fund (IMF) estimates that the kingdom requires oil prices above $90 per barrel to balance its budget. With Brent crude expected to average around $60 per barrel for the remainder of 2025, Saudi Arabia’s budget deficit could balloon to as much as $70-75 billion, according to Goldman Sachs.
Implications for Saudi Arabia
The strain on Aramco’s finances is expected to have ripple effects on the Saudi government, which relies heavily on oil revenues to fund its ambitious megaprojects under Vision 2030. Analysts warn that prolonged low oil prices may force the kingdom to increase borrowing, cut spending, or sell assets to manage its growing fiscal deficit.
Farouk Soussa, MENA economist at Goldman Sachs, highlighted the potential impact, stating, “We’re probably going to see the deficit go up from around $30 to $35 billion to around $70 to $75 billion if oil prices stay around $62 this year. That means more borrowing, probably more cutbacks on expenditure, and potentially even international implications.”
Aramco’s Resilience
Despite these challenges, Aramco continues to emphasize its financial resilience and long-term outlook. The company remains committed to capitalizing on its low-cost operational model and maintaining reliable energy supply in a volatile market.
As the global energy landscape evolves, Aramco faces the dual challenge of navigating short-term economic pressures while positioning itself for long-term sustainability. For now, the company’s ability to weather the storm will be closely watched by investors and policymakers alike.
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