— This is the script of CNBC's news report for China's CCTV on August 9, 2021, Monday.
Aramco's earnings beat market expectations. While profits skyrocketed in the second quarter, free cash flow reached $22.6 billion. It declared quarterly dividend of $18.8 billion for the first time since the start of the pandemic. Being a state-controlled firm, Aramco's dividend payment to the government would play an important role in supporting for Saudi Arabia's economic development and transformation.
Brent and WTI have risen about 40% since the start of this year, providing strong support for the share prices of major oil firms. Besides Aramco, the other major players-BP, Chevron and Royal Dutch Shell all delivered good results for the past quarter, announced share buyback plans and raised dividends. All these reflect their confidence in the recovery of the global economy and oil demand. During the earnings call, the CEO of Aramco gave a positive outlook.
Amin Nasser
Saudi Aramco, President & CEO
"The estimate by year-end, it's going to be around 99 (million barrels a day) and you are looking at 100 (million barrels a day) and these are good indicators of recovery in the economy. "
However, the oil market seems to have lost momentum recently. Brent fell more than 6% last week, its largest weekly loss in four months, and WTI shed nearly 7% in its biggest weekly decline in nine months.
The rising infections of Delta variant in many major economies bring huge uncertainty to the demand and prices of oil, as we may see more lockdowns.
Bernard Looney
BP CEO
"There are always uncertainties. And we have to be very cognizant of downside risks. I think downside risks in our world right now, for the global economy, and particularly for oil prices would have to be around things like will the vaccines be resistant to the Delta Varian, for example, in the United States, and in Asia. So far, I think the data looks reasonably good on that. We are seeing a slight muting of oil demand because of that, but I wouldn't say it's material yet."
On top of the uncertainty around short-term demand, oil giants are also facing growing pressure for green transformation in the mid to long term. The board of ExxonMobil was forced to replace some of its members. Meanwhile, advocates for low-carbon emissions have also prevailed on Chevron's board.
For Aramco, transformation is crucial. While increasing investment in clean energy, the oil giant is also looking for opportunities to sell some assets. Aramco signed a $12.4 billion deal to sell part of its oil pipelines in the second quarter. The company's debt ratio is coming down, but still higher than the target level set by the management team.