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Saudi Aramco confirmed that it would pay more than $124bn in dividends this year as it said the market was underestimating the demand for oil.
“We continue to be surprised on the upside in terms of demand. It’s a robust demand. We see it from all markets in spite of what’s happening in the [energy] transition,” said Amin Nasser, the chief executive of the world’s largest oil company.
Aramco’s dividends have been growing at an annual pace of roughly 30 per cent, putting the company on track for an annual payout of $124.2bn. By comparison, ExxonMobil returned $32.4bn to shareholders in dividends and buybacks for 2023.
Nasser said the market was “largely ignoring” the strength of oil demand, particularly from China, where he said Aramco expected total demand in the second half of the year to be “around 17.5mn barrels a day (b/d)”, a rise of 700,000 b/d compared with the same period last year.
As a result, he said Aramco was anticipating a healthy oil market for the rest of this year, with total demand of about 104.7mn b/d. He added that oil demand for next year would be north of 106mn b/d.
Nasser added that while the economy was slowing in China, there had been a jump in demand for jet fuel and for the oil-derived feedstocks for petrochemical products. “We are seeing significant growth in China. We are looking at almost 20 per cent growth in jet fuel. Just jet fuel and kerosene, you are seeing 500,000 b/d of growth.
“They are also putting much more feedstock into liquid (oil) to chemicals to support the transition. They need a lot of carbon fibre for solar panels. They need a lot of chemicals,” he said.
“Our estimates indicate that between 2019 and 2024, China is set to add as much production capacity for propylene as presently exists in Europe, Japan and Korea combined.”
He said the weaker refinery margins in the second quarter were likely to be a blip and pointed to the record refinery use rates of 93 per cent in the past three months as a sign of strength. “The market is reading too much into the short-term responses to the news coming from the US jobs numbers,” he added.
Underpinned by a stable oil price, Aramco said it would pay out a total of $31bn for the second quarter. The quarterly dividend payment is well above the company’s free cash flow.
The company’s dividends are an important source of revenue for the Saudi government that, along with the country’s sovereign wealth fund, owns 97 per cent of company.
The kingdom wants to use the proceeds from its fossil fuel assets to fund megaprojects, including the world’s tallest skyscraper.
The quarterly results come after the government in June sold about $12bn of shares in Saudi Aramco in an effort to broaden the company’s investor base.
Saudi Aramco shares have dropped nearly 20 per cent this year, as the company has scaled back production to help efforts by Opec+ to support the oil price.
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