What's going on?

Saudi Aramco � the biggest company in the world � saw its first-quarter profit drop 25% on Tuesday, as the one-two punch of collapsing oil prices and falling demand battered the Saudi oil giant�s sales.

What does this mean?

Aramco�s first-quarter earnings came in below expectations, but the worst may be yet to come. It was only in April, after all, that oil prices hit a 34-year low, suggesting the impact will probably be even more pronounced next quarter. And that may be why Aramco�s decided to slash its 2020 spending by 25% (tweet this).

Fortunately for Saudi Arabia, the oil giant didn�t do the same to its dividend. The Kingdom � which owns around 98% of Aramco � relies heavily on those payouts to cover its spending. So if they vanish � and the oil price collapse continues to wreak havoc on the country�s finances � the austerity measures announced on Monday could be just the beginning�

Why should I care?

For markets: Parental supervision.
Big Oil�s generous dividends have long been a key attraction for investors, but they�re increasingly under threat. Exxon Mobil, for one, recently froze its payouts, while Royal Dutch Shell�s were slashed by two-thirds. So investors might simply be relieved Aramco held its ground. Then again, other oil majors aren�t under their governments� thumbs like Aramco is: Saudi Arabia told the state-owned company to pump at maximum capacity in March, only to insist it cuts production by more than 40% two months later.

The bigger picture: No way, Norway.
It�s not just Saudi Arabia feeling the heat: Norway, western Europe�s largest oil exporter, is facing its worst economic slump since World War II due to the collapse in oil price and demand. The country revealed on Tuesday that it�s withdrawing a record $37 billion from its gigantic investment fund. That would in turn force the fund � the biggest in the world � to sell a significant chunk of its bond holdings, which could add pressure to global bond markets.