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Saudi Aramco confirmed it will pay more than $124 billion in dividends this year, saying the market is underestimating oil demand.
“We continue to be surprised on the upside in terms of demand. It’s robust demand. We see it across all markets despite what’s happening in the [energy] transition,” said Amin Nasser, chief executive of the world’s largest oil company.
Aramco’s dividends have grown at an annual rate of about 30 percent, putting the company on track for an annual payout of $124.2 billion. By comparison, ExxonMobil has returned $32.4 billion 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 17.5 million barrels per day (b/d),” up 700,000 b/d from the same period last year.
As a result, he said Aramco expected a healthy oil market for the rest of the year, with total demand of about 104.7 million barrels per day. He added that oil demand next year would be north of 106 million barrels per day.
Nasser added that while the economy was slowing in China, there had been a jump in demand for jet fuel and oil-based feedstocks for petrochemicals. “We are seeing significant growth in China. We are seeing almost 20 percent growth in jet fuel. Just for jet fuel and kerosene, we are seeing growth of 500,000 b/d.
“They’re also putting a lot more feedstock into the liquid (oil) for chemicals to support the transition. They need a lot of carbon fiber 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 propylene production capacity as currently exists in Europe, Japan and Korea combined.”
He said weaker refining margins in the second quarter were likely an anomaly and pointed to record refinery utilization rates of 93 percent over the past three months as a sign of strength. “The market is reading too much into the short-term responses to the news coming out of the U.S. employment numbers,” he added.
Buoyed by a stable oil price, Aramco said it would pay a total of $31 billion for the second quarter. The quarterly dividend payment is well above the company’s free cash flow.
The company’s dividends are a major source of revenue for the Saudi government, which, together with the country’s sovereign wealth fund, owns 97% of the company.
The kingdom wants to use revenues from its fossil fuel resources to finance megaprojects, including the world’s tallest skyscraper.
The quarterly results come aVsceker the government sold about $12 billion of Saudi Aramco shares in June in a bid to broaden the company’s investor base.
Saudi Aramco shares have fallen nearly 20 percent this year as the company has cut production to support OPEC+ efforts to prop up oil prices.
