Aramco Reports 5% Drop in Q1 Profit Amid Weak Oil Prices and Production Cuts

Saudi oil giant Aramco posted a 5% year-over-year decline in net profit for the first quarter of 2025, driven by lower crude prices and production output.

The company reported net income of $26 billion for the three months ending March 31, down from $27.3 billion a year earlier. Despite the dip, the figure slightly beat analyst expectations of $25.3 billion.

Free cash flow for the quarter came in at $19.2 billion, down from $22.8 billion in Q1 2024. Operating cash flow also dropped to $31.7 billion from $33.6 billion a year ago.

Sluggish Global Demand Adds Pressure

The lower profit signals ongoing pressure on Aramco’s balance sheet as global oil demand slows and crude prices remain under strain. CEO Amin Nasser said global economic uncertainty and weak trade activity were the main headwinds for energy markets in Q1 2025.

“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,” Nasser stated. He also emphasized the importance of disciplined capital allocation and maintaining a long-term outlook.

Sharp Cut to Performance-Linked Dividend

In a notable move, Aramco slashed its performance-linked dividend from $10.2 billion in Q4 2024 to just $200 million — a figure it is maintaining for Q1 2025. Meanwhile, the base dividend rose 4.2% year-over-year to $21.1 billion.

However, the total Q1 dividend dropped significantly to $21.36 billion, down from $31 billion in the same period last year due to the steep cut in performance-based payouts — a decision that could have major implications for Saudi Arabia’s budget, which relies heavily on oil revenue.

Bearish Oil Outlook Challenges OPEC Strategy

The reduced dividend eases Aramco’s internal financial strain but reduces cash flow to the Saudi government, which is already grappling with rising debt and ambitious mega-project costs.

Saudi Arabia has constrained oil revenue potential by sticking to months of OPEC+ voluntary output cuts. However, in April, the Kingdom and several OPEC+ partners unexpectedly accelerated production increases, despite global markets reacting negatively and crude prices continuing to fall due to U.S. tariff-driven trade concerns.

In early May, OPEC+ raised its production target for June by 411,000 barrels per day, marking the second consecutive month of rolling back the 2.2 million bpd voluntary cuts initiated in early 2024.

Analysts Cut Oil Price Forecasts

EIA: Projects Brent crude to average $65.85/barrel in 2025

Morgan Stanley: Lowered its H2 2025 Brent forecast to $62.50/barrel, citing an expected market surplus of 1.1 million bpd

Goldman Sachs: Predicts Brent at $60/barrel for the rest of 2025, and $56/barrel in 2026

According to the International Monetary Fund (IMF), Saudi Arabia needs oil prices above $90/barrel to balance its 2025 budget. At current price levels, Goldman Sachs estimates the Kingdom's budget deficit could double from $35 billion to as much as $75 billion this year.

“This could mean more borrowing, reduced spending, and increased asset sales,” said Farouk Soussa, MENA economist at Goldman Sachs. “The implications will extend beyond Saudi Arabia’s domestic financial conditions and could even affect global markets.”

Conclusion

Aramco’s Q1 2025 results underscore the financial vulnerability of oil-dependent economies in a low-price environment. As the world grapples with slowing demand and surplus supply, Aramco and the Saudi government will need to adapt quickly — balancing internal fiscal priorities with external energy market realities.

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Source: CNBC