Fitch revises Saudi Aramco’s outlook to stable as oil prices rise

RIYADH: Fitch Ratings, the leading global credit rating agency, has revised its Saudi Aramco outlook to stable from negative as oil prices improved this year and demand for the crude oil expected to continue increasing through 2022 with more vaccine roll out globally.

Fitch also affirmed the company’s long-term issuer default rating (IDR) at A. The revision of the outlook on Saudi Aramco’s IDR is driven by a similar action on the sovereign, the rating agency said in a report on Tuesday.

“We assess Saudi Aramco’s Standalone Credit Profile (SCP) at ‘AA+,’” Fitch said. This review follows Fitch Ratings decision to raise Saudi Arabia’s sovereign outlook to stable from negative last week due to significantly higher oil prices and continued government commitment to improve its public finances.

Fitch has upgraded Aramco’s credit rating because of improving oil prices, head of research at Riyadh-based Al-Rajhi Capital Mazen Al-Sudairi told Arab news.

“Aramco is expected to generate approximately SR85 billion net profit in the second quarter and the total first half of this year could be 90 percent full-year 2020 earnings, which will further enhance its balance sheet and ratios,” he said.

Aramco’s financial profile benefits from strong pre-dividend free cash flow generation and recently increased but still conservative leverage, the ratings agency said.

Oil exports

The value of Saudi Arabia’s oil exports in May increased 147 percent to just over SR60 billion ($16 billion) from a year earlier while non-oil exports rose by 70 percent, official data showed on Wednesday.

The jump in oil exports was the main driver of the rise in the value of total Saudi exports of goods in May 2021, when merchandise exports jumped by 120.1 percent year-on-year. The May 2020 trade was hit by the COVID-related lockdowns and travel bans.

Over the course of the year to May 2021, Saudi Arabia also significantly raised the share of oil exports in total merchandise exports — from 65.3 percent in May 2020 to 73.2 percent in May 2021. Saudi Arabia’s key trading partner continued to be China, the world’s largest oil importer. In May 2021, Saudi exports to China accounted for 21.4 percent of total exports, followed by India and Japan, with 9.3 percent and 7.5 percent of all Saudi exports, respectively.  

This year, the value of Saudi exports rose after crude oil prices rallied and Saudi Arabia and OPEC+ began to relax their production cuts in May.