Rigged System

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What’s going on?

Saudi Aramco, the world’s biggest oil company, reported booming quarterly profits over the weekend.

What does this mean?

Aramco had a couple of things working in its favor last quarter. For one, the war in Ukraine limited the supply of oil and pushed its price to a 14-year high. And for another, OPEC+ – a group of oil-producing countries and their allies – continued to unwind the production caps it introduced during the pandemic. That helped drive the company’s profit 82% higher than the same time last year to $40 billion – its highest quarterly profit since its arrival on the stock market.

Aramco’s not done yet: the company is confident that demand for oil and gas will be strong for decades, even as its international rivals make a decisive shift toward renewables. That might be why it said it’s planning to spend billions on ramping up its oil production, as well as on boosting its natural gas production by 50% by the end of the decade.

Why should I care?

For markets: An iPhone won’t pick the kids up from school.

Aramco’s stock is now up over 30% so far this year, while Apple’s has fallen 19% on the back of a tech stock rout. That means it’s now overtaken the tech giant to become the world’s most valuable company for the first time since 2020. That stands to reason: one of the things working heavily in Aramco’s favor – rising prices – is working against Apple, whose little luxuries are the first things to go when it costs a fortune to fill your car.

The bigger picture: Saudi Arabia gets a caffeine kick.

The Saudi government – which owns the majority of Aramco’s stock – will be pleased to hear that the company is on track to return $19 billion to its shareholders this quarter. The country is aiming to use some of the extra cash it makes to invest in new exports that will help reduce its reliance on oil. Coffee beans – you’re up.

Originally Posted May 16, 2022 – Rigged System

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