Saudi Aramco reported a net profit of $88.2 billion for 2019, down from $111.1 billion a year earlier as low oil prices and production curbs took their toll on the world's largest oil company.

Free cash flow was also lower, at $78.3 billion, down from $85.8 billion in 2018, but still a solid amount. Spending in 2019 was lower than in 2018, at $32.8 billion, compared with $35.1 billion for 2018. Spending plans for this year are, unsurprisingly, for even lower spending, at between $25 and $30 billion, Aramco said.

?The recent COVID-19 outbreak and its rapid spread illustrate the importance of agility and adaptability in an ever-changing global landscape,? the company's chief executive Amin Nasser said. ?This is central to Saudi Aramco's strategy and we will ensure that we maintain the strength of our operations and our finances. In fact, we have already taken steps to rationalize our planned 2020 capital spending.?

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The pandemic has depressed oil prices much below the $80 per barrel that Saudi Arabia needs to balance its budget despite the fact Aramco boasts the lowest production costs in the industry. Yet the Kingdom itself helped oil prices crash this time when it declared that it would raise oil production above 12 million bpd, after Russia refused to take part in the latest round of deeper production cuts.

In a bid to punish its former partner and maintain market share, the Kingdom also announced it would also cut the official selling prices for its crude from next month, with the United States and north-western Europe set to benefit from the deepest price cuts.

Meanwhile, the outbreak has seriously hurt oil demand as well, darkening the industry outlook for the rest of the year. Fund managers and investment bankers are in a rush to revise down their demand forecasts, with expectations suggesting that oil demand could drop by the greatest rate on record, surpassing such demand drops as the one in 1980 and the one in 2009 following the Great Recession.

By Irina Slav for Oilprice.com

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