Aramco raises US$3 billion in debt sale as Saudi Arabia drops US$100/bbl oil price

At the same time, the Saudi Government has rescinded its unofficial plan of keeping oil prices at US$100/bbl as it plans to increase the kingdom’s output. The Islamic bonds come as a form of debt raising. Aramco has outlined it must pay US$124.3 billion in dividends for 2024 at a time where the company’s oil production is a quarter below its capacity.

These dividend payments are up from US$97.8 billion last year. Reuters reported that the company, in which the Saudi Government holds nearly an 81.5% stake, aims to raise up to US$3 billion from Islamic bonds. Saudi Arabia’s Sovereign Public Investment Fund holds a 16% stake in Aramco.

Monica Malik, Chief Economist at Abu Dhabi Commercial Bank, has explained that Aramco’s dividend payments were higher than the company’s cash flow for 1H24. Aramco has been a huge source of income for Saudi Arabia, but recently lower oil prices and production cuts have hit profits. However, the Organization of the Petroleum Exporting Countries (as well as the larger OPEC+ grouping) is committing to increasing oil production on 1 December, despite a potential decrease in prices.

Saudi Arabia is subsequently preparing to increase its oil output in order to regain its market share, subsequently abandoning its US$100/bbl oil price, the Financial Times reported. Saudi Arabia has decided it is unwilling to continue the decrease in its market share to other oil producers, arguing it has enough funding options to withstand lower oil prices. Debt funding scenarios, like Aramco, are one of these options. According to GlobalData, Saudi Arabia’s total oil production hit 9.7 million bpd in 2023.

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