Saudi Aramco slashes this year's investments in the first warning that weak demand and the oil price war that the country unleashed are taking a heavy damage back home.
On Sunday, Saudi Aramco reported a 21 percent drop in net revenue in 2019 due to a drop in oil prices and production, and said it plans to "rationalize" capital expenditures following the coronavirus outbreak.
Last year's fall in net income means it fell short of analysts' expectations for the period resulting in drop of sales, months before the pandemic became a critical element in oil prices.
Saudi Arabia and Russia's oil-price war means more misery for Aramco as the refining countries gear up to hike production. Slashed-down pricing to markets still suffering from low demand and oil that has lost nearly half of its market value since the start of the year is likely to further impact sales.
It was the first announcement of Aramco's earnings since it listed in a record $29.4 billion initial public offering in December that priced the company at $1.7 trillion.
Riyadh has reported in recent weeks that it is ramping up production in an oil price showdown with Russia that has sent world prices plummeting and led to the pandemic rout on global financial trading floors.
The blow from the coronavirus to oil usage this year surpassed OPEC's initial optimism for production, with analysts now anticipating a decrease in supplies.
The failure of the OPEC+ community on March 6 to decide on more cuts only exacerbates a surplus as buyers try tanks and vessels for storage.
In a statement, the oil giant took steps to initiate emergency rations and planned capital investment in 2020 following the coronavirus outbreak, Aramco chief executive officer Amin Nasser said.
In light of current market conditions and recent fluctuations in commodity prices, the company said it expects capital spending for 2020 to be between $25 billion and $30 billion, compared to $32.8 billion in 2019.
Last year, oil prices dropped, even as Saudi Arabia trimmed output as part of OPEC's efforts to rein in demand. Drone and missile attacks in September on two of its largest facilities briefly cut demand by more than half but did not cause a major price spike.
Aramco, owned by the Gulf Kingdom with 98 percent stakes, posted a net profit of $88.2 billion in 2019, down from $111.1 in 2018. Analysts had projected Aramco to post a net profit of $92.6 billion in 2019, according to an estimate of 15 market observers surveyed by Refinitiv.
