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Saudi Aramco, the state-owned oil company, is facing challenges as lower oil production and fluctuating oil prices impact its earnings. Despite these obstacles, Aramco remains a crucial source of income for the Saudi government, especially as they pursue expensive projects such as the futuristic city Neom and investments in sports.

To boost prices, Saudi Arabia has been keeping oil output at around 9 million barrels a day, which is about 1 million barrels below the average of the past decade. This strategy will continue until at least the end of the year. The recent fluctuations in oil prices, including concerns about the war between Israel and Hamas, have not significantly affected global supplies. Brent crude is currently trading at around $85 per barrel, the same level as before the October 7 attack by Hamas on Israel. Given the stability in prices, Saudi Arabia, along with its OPEC+ partner Russia, is maintaining its unilateral output cuts for now.

Furthermore, there are indications of a weakening physical oil market, particularly with softening demand for fuels like diesel in Europe. This suggests lackluster economic growth in the region. In response to these developments, Saudi Arabia may extend its supply cuts into next year to address the weakening market conditions.

Despite these challenges, Aramco aims to gradually increase shareholder payouts. The company has introduced a new performance-based dividend structure that is linked to free cash flow. This approach mirrors the prioritization of shareholder returns seen in other international oil majors, such as Shell Plc, which has been increasing its stock buy-back program.

As Saudi Aramco navigates the complexities of the oil market, it remains a critical engine of revenue for the Saudi government. With its strategic initiatives and focus on shareholder returns, the company is committed to maintaining its position as a global leader in the oil industry.