Brent: The Global Oil Price Index and Its Impact on Saudi Markets

Brent crude is a type of light oil extracted from the North Sea and is used as a global benchmark for pricing crude oil. It is known for its high quality, characterized by a high API gravity and low impurity levels, making it preferred by global refineries. Brent serves as the basis for pricing more than half of the oil traded worldwide, and many international buyers rely on it to determine their futures and spot contracts. In the Saudi financial market, Brent has become a vital index, as Saudi Aramco prices most of its oil exports based on the Brent price, with adjustments made according to the quality of the crude. This direct linkage makes the Brent price a crucial element in evaluating the performance of Saudi energy companies' stocks and affects the macroeconomic indicators in the Kingdom.

The name Brent comes from an oil field in the North Sea discovered by Shell in the 1970s. Over time, the status of this crude has evolved to become the benchmark for oil pricing in Europe, Africa, and parts of Asia. Eventually, Brent began to be used for pricing futures contracts on the ICE exchange in London and today represents one of two key oil indicators, alongside West Texas Intermediate (WTI). In recent decades, Brent prices have experienced sharp fluctuations influenced by geopolitical factors, OPEC decisions, global economic shifts, and technological advancements in shale oil extraction. These fluctuations have made monitoring Brent essential for investors and decision-makers in Saudi Arabia and other oil-producing countries.

Brent prices are affected by several key factors, including: global supply and demand, OPEC+ production decisions, geopolitical events in production areas, global economic growth or slowdown (especially in China, India, and Europe), seasonal climate changes, the development of energy alternatives, and finally, trading by speculators and hedge funds in financial markets. Additionally, production costs and inventory levels in major countries play a role in determining the price, along with the energy and emissions policies of major countries. In recent years, events such as the COVID-19 pandemic and sharp OPEC+ cuts have contributed to significant fluctuations in Brent prices, with direct implications for the performance of the Saudi financial market.

Saudi Aramco is the largest oil company in the world, pricing a substantial portion of its oil exports based on the Brent price. The company issues what is known as the Official Selling Price (OSP), which follows Brent movements with adjustments that consider the specifications of Saudi crude. When Brent prices rise, Aramco's revenues and net profits increase, supporting its financial performance and enhancing the attractiveness of its stock in the Saudi financial market. Conversely, a decline in Brent prices pressures the company's results and negatively affects dividend distributions and government revenues, reflecting the importance of monitoring Brent as a tool for analyzing Aramco's performance and the financial market in general.

Brent crude prices have shown clear fluctuations during the 2024-2025 period. At the beginning of 2024, the price was around $80 per barrel, then gradually rose above $90 in October 2024 following OPEC+ production cut decisions, before retreating again to $80-85 by the end of the year. During the first quarter of 2025, the price stabilized between $75-80, then temporarily rose in September 2025 to nearly $90, before dropping to $70-75 by the end of the year. The average Brent price for 2024 was about $85 per barrel, compared to around $71 in 2023. These movements reflect market dynamics and their impact on global production decisions, significantly affecting the revenues of Saudi oil companies and overall economic performance.

The energy sector, particularly oil and gas, forms the backbone of the Saudi economy. Saudi Arabia holds the largest confirmed oil reserves globally and relies on oil revenues to finance a significant portion of its public budget. Rising Brent prices enhance the state's ability to spend on infrastructure and development projects, while falling prices can lead to financial pressures that may reflect on the Saudi financial market. In recent years, the Kingdom has made efforts to diversify its income sources as part of Vision 2030, yet oil and its pricing linked to Brent remain the primary players in national economic performance.

Brent is an economic indicator with a wide impact on the Saudi stock market, especially on the stocks of energy companies like Aramco and SABIC. Rising Brent prices often lead to improved results for these companies and increased dividends, supporting the overall market index. Conversely, a decline in Brent may lead to reduced government revenues and cutbacks in public spending, negatively impacting the overall market performance. For this reason, investors and financial analysts closely monitor Brent developments daily, relying on them to assess risks and opportunities in the local market.

Brent faces competition from other oil benchmarks, most notably West Texas Intermediate (WTI) and Dubai/Oman crude used in Asian markets. The differences between these benchmarks stem from oil quality and geographical delivery locations. Typically, Brent is slightly more expensive than WTI due to its proximity to European and Asian consumption markets and its higher quality. In the Saudi market, Brent remains the primary reference index, while some companies use other benchmarks in their contracts with Asian markets, reflecting the dynamic nature of global oil pricing.

Brent price data is available through several platforms, most notably the ICE Futures exchange in London, OPEC reports, the International Energy Agency, and major oil companies' websites like Saudi Aramco. Additionally, platforms like Investing.com and Bloomberg provide real-time price updates, while the Saudi Capital Market Authority (Tadawul) and Argaam offer updated reports on the performance of local oil companies. It is advisable to rely on these official sources for accurate and reliable data when analyzing Brent's impact on local or global markets.

Brent, as a global commodity, cannot be traded directly on the Saudi stock market; however, investors can gain exposure to its fluctuations by investing in local oil company stocks like Aramco and SABIC or through investment funds focused on the energy sector. Some banks and investment firms offer financial instruments linked to Brent's performance, such as index funds or derivatives. It is essential to recognize that investing in oil-linked instruments involves a high degree of volatility and risk, and it is advisable to consult a licensed financial expert before making any investment decisions.

The years 2024 and 2025 witnessed significant events affecting the Brent market, including OPEC+ production cut decisions, geopolitical tensions in the Middle East, a strong rebound in Chinese demand, and increased investments in renewable energy. Additionally, movements by hedge funds in financial markets impacted price fluctuations in short periods. On the corporate front, Aramco announced expansion projects in refining and digital technologies, while the Kingdom continued to implement massive renewable energy projects as part of its diversification vision. All these developments confirm that the Brent market remains subject to rapid changes requiring careful monitoring and continuous analysis by investors.

With increasing discussions about the transition to renewable energy and reducing carbon emissions, Saudi Arabia continues to invest in the oil sector while focusing on developing alternative sources such as green hydrogen and solar energy. Despite these efforts, oil and its pricing linked to Brent are expected to remain a key component of the Saudi economy for decades to come. Future challenges include price volatility, shifts in global demand, and environmental requirements, while opportunities arise in enhancing operational efficiency and increasing value-added from petrochemical and refining industries.

Financial data analysis shows a close correlation between Brent price fluctuations and the performance of Saudi economic indicators. Rising Brent prices increase budget surpluses, bolster public and private investments, and stimulate GDP growth. Conversely, its decline puts pressure on government spending and sometimes leads to a reassessment of developmental project priorities. Additionally, the overall Tadawul index is affected by the stock price movements of energy companies, which are directly linked to Aramco's results and the global Brent price. Thus, Brent is considered an important monitoring tool for decision-makers and analysts in the Saudi market.