The Scene
Saudi Aramco will report its 2025 earnings tomorrow, but the focus will be on how the company balances soaring oil prices against unprecedented challenges to getting its crude to customers after the closure of the Strait of Hormuz.
When Aramco’s facilities were hit in 2019, knocking out half of the kingdom’s export capacity, the company boasted that it never missed a shipment to international customers. It may be more difficult to keep that hard-won reputation for reliability during the current crisis, which will test whether years of resiliency planning mean Aramco can capitalize on soaring oil prices, or miss out. Some analysts say it will be the latter.
“It seems unlikely that Middle Eastern producers will be able to take full advantage of the higher commodity prices in the near term,” because they will be unable to get their oil to market, JPMorgan said in a note.
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The world’s largest oil exporter is facing multiple threats at the same time. Iranian attacks are targeting Aramco oil fields and processing facilities, and Tehran has effectively blocked the Strait of Hormuz. It’s a nightmare scenario for the company’s ability to make and export its products.
Surging oil prices have lifted Aramco’s stock to its highest in the past year. Yet a consensus of analyst estimates puts Aramco’s net income for 2026 at 363 billion riyals ($96.5 billion), marking a fall of around 3% from estimates of 374 billion riyals for 2025.
Goldman Sachs has warned that higher prices “could be offset by lower upstream production dependent on the Strait of Hormuz.”
Already Iraq, Kuwait, and the UAE have said they are curtailing production because of an inability to export through the Strait.
Aramco’s revenues are a crucial source of income for the Saudi government. Oil receipts — in the form of dividend’s, taxation, or royalties — comprised about 54% of state revenues last year.
Matthew’s view
Key questions for Aramco’s management this week include whether it can find alternative routes for its crude, whether it will risk trying to export through the Strait of Hormuz, and whether it can protect its facilities from a continued barrage of Iranian attacks.
So far, its track record of defending and repairing its infrastructure is good. What remains untested is its ability to operate in an increasingly hostile environment, and ramp up oil flows to the kingdom’s Red Sea coast via pipeline, thereby bypassing Hormuz.
If it can’t get its oil out of the kingdom, Aramco will likely face the same fate as state energy companies in Iraq, Kuwait, Qatar, and the UAE, which have had to start cutting back oil and gas production because they have nowhere to put it.
That scenario — a sustained oil supply shock — will have severe consequences for the Saudi economy, and the world.
Notable
- Saudi Aramco’s shares rose the most in more than two years as investors bet that the rise in oil prices could offset declines in exports, Bloomberg reported.