What's going on?

There are few things more calming to Saudi Aramco than a recovering global economy: the oil giant announced its highest quarterly profit in eighteen months on Tuesday.

What does this mean?

Aramco had a tough time of it last year when demand for and the price of oil went into freefall, with its profit collapsing 44% versus the year before. But as the world began to look to the future and investors could almost feel the economy bouncing back, oil�s price started to climb. The dusky nectar, after all, is used in everything from transport to manufacturing, and higher economic activity (all else equal) leads to higher prices � 30% higher this year, to be precise. And that leads to higher earnings for oil producers � like Aramco � that get it out of the ground and sell it on.

Why should I care?

For markets: Dividends are dead, long live dividends.

One of oil companies� big draws is the regular cash payouts they offer investors � a reward for taking the risk of buying into them. Those dividends matter so much to Aramco�s investors, in fact, that the firm even borrowed money a few months ago to make sure it could keep paying them. And it might have to do the same again: its first-quarter dividend of almost $20 billion was higher than its �free cash flow� � or the amount of cash it generated after making necessary reinvestments into the business. In other words, the only way Aramco could make up the difference would be by dipping into its own cash reserves � an unsustainable long-term move.

The bigger picture: Oil companies keep in lockstep.

Aramco isn�t the only oil major starting to see an improvement: ConocoPhillips announced upbeat results on Tuesday, having benefited from a big freeze in parts of the US that drove gas prices higher. And Total � one of the biggest investors in green energy among energy companies � posted first-quarter earnings that had all but recovered from the pandemic.