KUWAIT CITY, July 31: The decline in Kuwait Oil Company’s profits for the fiscal year 2023/2024 highlights the significant impact of external factors on its financial performance. This is due to Kuwait’s commitment to reducing its oil production by 135,000 barrels per day as part of the OPEC+ agreement has directly affected the company’s revenue.

This voluntary cut was a major factor contributing to the lower profits. Moreover, the average price of Kuwaiti oil fell to $85 per barrel during 2023/2024, down from over $130 per barrel in the previous fiscal year. This decrease in oil prices, which was influenced by various global economic factors including the aftermath of the Ukrainian war and the return to economic activity post-COVID-19, has also contributed to the decline in revenues.

The Al-Seyassah daily quoting oil sources said, despite the profit decline, Kuwait Oil Company plans to invest over 13 billion dinars by 2028. This investment is aimed at expanding its oil projects to boost future revenues and enhance profitability. The company’s efforts to increase its revenue through significant investments in oil projects reflect a proactive approach to managing the impacts of lower oil prices and production cuts. Hajjaj Bukhadour, a Kuwaiti economist who had worked as a consultant in several companies, emphasizes that Kuwait’s reduction in oil production as part of the OPEC+ agreement is a primary reason for the profit decline.

The policy aims to stabilize oil prices and manage inflation, as high oil prices contribute to increased inflation rates globally. OPEC+ is focused on controlling inflation by managing oil prices. A significant rise in oil prices, such as exceeding $90 per barrel, could exacerbate inflationary pressures. This, in turn, would lead to higher interest rates set by global central banks, affecting economic stability. Bukhadour anticipates that Kuwait Oil Company’s revenues could improve if Kuwait’s production share within OPEC+ increases to 3.5 million barrels per day by 2025. This potential increase in production could boost the company’s revenue, counterbalancing the effects of previous production cuts and lower oil prices. Overall, Bukhadour’s comments highlight the balancing act between managing oil production levels to stabilize prices and addressing the economic impacts of those decisions on the company’s profitability.

By Najeh Bilal
Al-Seyassah/Arab Times Staff