Beyond the monetary policy decisions taken by the main central banks of the planet (ECB, Fed and BoJ), the barrel of oil has become one of the main centers of attention of the financial markets. Tensions around the price of crude oil have been constant in recent years. Its fall to levels not seen for several years is presented as the best example. In fact, the barrel of Brent It has lost more than 25% since hitting its highest levels in recent years in the middle of last year, which is being felt in oil companies’ margins and, therefore, their stock prices.
The largest company in the sector, Aramcois no exception. A few weeks before the fifth anniversary of its IPO, the Saudi oil company is not having its best time on the stock market. Its share price ended up recording declines of the monthly balance of 10 of the last 12 monthswhich sent its shares down to less than 2% from their lows of the year after falling more than 30% of their market capitalization since their peak in 2022.
Its shares are trading at levels similar to those recorded during its stock market debut in December 2019, even though Analysts’ assessments call for calm. And expert recommendations have improved in recent weeks, coinciding with the decline in their stock market shares.
This situation has caused the gap between its price and analysts’ valuations to reach one of its highest levels since January 2023, or in almost 21 months, and, consequently, Its upside potential has climbed to 20%.
Today, nearly 30% of all experts recommend taking a position in Aramco, up from 12% who did so before crude oil’s decline deepened earlier this summer. While the sector’s largest company isn’t among experts’ favorites of all companies in the sector, it does rank as the one with the best dividend yield.
It is not for nothing that after presenting its results for the second quarter of the year, Aramco announced that the total dividend payment scheduled for 2024 would be $124.2 billion (31 billion quarterly) which gives a dividend yield of more than 7.2%.
This disbursement will, however, help the Saudi company move from a cash position to a net debt position in the next quarter, because, as analysts at Bloomberg Dividend disbursements are beginning to exceed cash generation. “However,” the same experts point out, “The company enjoys a strong financial position, suggesting that shareholder returns from earnings could extend into 2025. if management is comfortable with greater leverage.
In any case, it does not seem that its shareholder remuneration policy can save the Saudi oil company from record its worst stock market year in its short history on the stock marketwhose shares have already fallen by 17% since the start of the year.
Oil, a symptom of declining global growth?
Growing concerns about the global growth of the planet’s economy have increased in recent hours given the low price of oil, which has already fallen by more than 25% from the highest levels of 2023. In fact, the barrel of Brent It is trading at its lowest level in two years despite the rebound recorded this Wednesday, which led it to return to around the psychological level of 70 dollars per barrel.
OPEC’s forecast of a reduction in expected crude oil demand for 2024-25 has precipitated the commodity’s fall that follows in the wake of the rest of the year. basic products this year, which are trading, for the most part, in negative territory in the annual balance with the exception of precious metals, which are trading with increases of close to 20% since January 1.
The forecast of a surplus in the second half of the year due to the constant increase in supply in America (USA, Guyana, Canada, etc.) also contributes to this trend.“Demand is partially stagnant and production is increasing in America, so the oil market is likely to experience oversupply next year.”“, warn experts from the Swiss private bank Julius Baer, while assuring that they have had to lower their price targets in this regard.
