Price gains for Saudi Aramco shares despite declining Q3 earnings.

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Aramco’s net income plunged 44.6% in the third quarter amidst the pandemic
Crude oil prices reached an almost 2-decade low after the outbreak of the virus in March
Saudi Aramco stock price has increased weekly gains to over 2% despite a slump in profits

Saudi Aramco (SE: 2222) closed the day with 0.58% in the green zone after the oil-titanium reported gains in the third quarter.

Fundamental analysis: Weak demand due to coronavirus

Saudi Aramco reported a 44.6% drop in net income in the third quarter as the coronavirus pandemic continues to weigh on demand and crude oil prices.

Oil companies’ inventories have fallen sharply this year due to investors’ fears of weak energy demand as a result of the coronavirus crisis.

Oil prices hit an almost two-decade low following the outbreak of the virus in March and have barely recovered since, prompting oil giants such as Aramco, Shell and BP to cut back on their capital spending this year and in 2021.

Lower refining and chemical margins also weighed on Aramco’s net income, which fell to 44.21 billion riyals ($11.79 billion) in the three months to September 30, almost in line with consensus estimates of 44.6 billion riyals, but fell short of the 79.84 billion riyals recorded in the same period last year.

“We have seen first signs of recovery in the third quarter due to improved economic activity, despite the headwinds facing global energy markets,” said Saudi Aramco CEO Amin Nasser.

Saudi Aramco’s shares climbed 1% and were in the green zone at 34.4 riyals at 0830 GMT, up 0.6%. However, although Aramco’s shares have been in the red since the beginning of the year by 2.3%, Aramco has overtaken its rivals such as Exxon, BP and Shell, whose shares fell by more than 50%, while Chevron is in the red at 40%.

Aramco’s better performance compared to its rivals is partly due to the broader performance of the Saudi stock market where Aramco is listed. The other reason is that Aramco is committed to paying dividends.

The oil giant said it will pay a dividend of $18.75 billion for the quarter, in line with its decision to pay a basic dividend of $75 billion for this year.

Technical analysis: stocks trade higher

The Saudi Aramco stock price has pushed weekly gains to over 2% to offset about half of last week’s losses (-4.53%). The shares traded almost 2% higher at one point before settling at 34.40, which was 0.58% positive for the day.

Daily chart of the Aramco share (TradingView)

The Saudi Aramco share price managed to close above the 200 DMA at 34.34, while moving towards 35.00, where the main short-term resistance line is located. Click here to find out about the best long-term stocks you can buy in November.

Summary

State oil giant Saudi Aramco reported a 44.6% drop in net profit in the third quarter as the coronavirus pandemic continues to impact energy demand and crude oil prices.

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