Oil Prices Today: Impact on Saudi Financial Market and Aramco

Oil prices today are determined in global markets through key benchmarks such as Brent crude or Oman crude, measured in US dollars. A range of fundamental factors influences the movement of this price, most notably the balance of global supply and demand, OPEC+ policies, major economic changes, and geopolitical risks. For instance, any decision by Saudi Arabia or Russia regarding production cuts or increases directly affects the spot price of oil. Additionally, US inventory data, the pace of global economic recovery, and rising demand from emerging markets play a role in determining price trends. In 2024, the market continued to experience price pressures due to weaknesses in some global industrial sectors, yet Saudi Arabia maintained its production cut policy to support prices. The rapid changes in financial markets and the interplay of political and economic factors make monitoring today's oil price essential for understanding the broader context of the Saudi market's performance.

The Saudi economy primarily relies on oil export revenues, which constitute a significant portion of government revenues and GDP. Any change in today's oil price reflects on the state's general budget, affecting government spending, development plans, and infrastructure projects. The value of the Saudi riyal and the stability of the financial market are also linked to the efficient management of oil revenues. In recent years, the Kingdom has adopted flexible policies to cope with oil price fluctuations, including diversifying income sources through Vision 2030 and developing non-oil sectors. Nevertheless, today's oil price remains a strategic indicator for all economic actors in the Kingdom, from investors to decision-makers.

Saudi Aramco occupies a pivotal position in the national economy and the Saudi financial market (Tadawul), being the largest oil company in the world by market capitalization and revenue. Aramco's results are directly affected by changes in today's oil price, as the majority of the company's revenues come from crude oil sales and derivatives. In the third quarter of 2024, Aramco recorded a net income of $27.6 billion, a decrease of about 15% from the previous year, impacted by falling oil prices. Nonetheless, the company continued to distribute generous dividends to shareholders, with a quarterly distribution of approximately 0.48 riyals per share. Additionally, Aramco invests in massive capital projects and renewable energy sectors, enhancing its ability to withstand oil price fluctuations and ensure long-term profitability.

Saudi Aramco's financial results in the third quarter of 2024 demonstrated strong resilience despite declining oil prices. Net income reached $27.6 billion, compared to $32.6 billion in the same quarter of 2023, reflecting a decrease of nearly 15%. On the other hand, total dividends amounted to $30.6 billion, including $20.3 billion in base dividends and $10.8 billion in additional performance dividends. The company also reported strong operating cash flows of $35.2 billion and $22.0 billion in free cash flow, reflecting the efficiency of its operations and its ability to continue dividend distributions even in a low-price environment. These results reflect the strength of Aramco's business model, its reliance on low production costs, and the integration of its operations in oil and petrochemical value chains.

The Saudi financial market index (TASI) is considered a mirror of national economic performance and is significantly affected by changes in today's oil price. When oil prices rise, the profits of major companies, led by Aramco, increase, supporting the general index and enhancing the market's attractiveness to local and foreign investors. Conversely, in cases of price declines, company profits may decrease, reducing investment liquidity. In 2024, with fluctuating oil prices, TASI experienced slight changes influenced by Aramco's results and petrochemical companies. Additionally, OPEC+'s production control policy helped mitigate the index's decline, yet today's oil price remains one of the key drivers of investor confidence and the performance of the Saudi market.

The oil and gas sector forms the backbone of the Saudi economy, hosting the largest energy companies in the world, led by Aramco. The Kingdom plays a leading role in OPEC, possessing vast reserves and production capacities capable of influencing global markets. In recent years, the sector has faced challenges related to price volatility, the increasing global shift towards clean energy, and operational efficiency requirements. In response, Saudi Arabia has invested in natural gas, petrochemicals, and renewable energy projects as part of Vision 2030 to reduce reliance on crude oil. The main challenges remain cost control, keeping pace with technological and environmental transformations, while maintaining leadership in international markets.

OPEC+ (the member countries of OPEC and non-OPEC countries led by Russia) plays a pivotal role in determining today's oil price trends. Through decisions to cut or increase production, OPEC+ can influence global supply levels and thus prices. In 2024, Saudi Arabia continued to coordinate with its OPEC+ partners to extend production cuts to support prices amid weak global demand. These policies are influenced by economic factors (such as inflation and global interest rates) and political factors (such as regional tensions). These movements are quickly reflected in oil prices, making it essential to monitor OPEC+ news to understand market dynamics and prices.

Despite Aramco's dominance in the crude oil sector in Saudi Arabia, there are other major companies in the energy and petrochemical sector, most notably SABIC (70% owned by Aramco), and companies like Yansab and Petro Rabigh. These companies focus on petrochemical and refining industries, complementing the value chain led by Aramco. Additionally, Aramco's involvement in joint ventures and acquisitions (such as the Petro Rabigh deal) enhances sector integration. While Aramco faces limited local competition, global competition comes from giants like ExxonMobil, BP, and Shell, driving Saudi companies to innovate and invest in modern technologies and renewable energy.

Saudi Aramco maintains a stable financial policy in dividend distribution, aiming to achieve an attractive return for shareholders even during times of oil price volatility. Dividends for the third quarter of 2024 amounted to approximately 0.48 riyals per share, totaling about $30.6 billion for the quarter. The annual dividend yield typically ranges between 3% and 4%, among the highest in the Saudi market. Aramco also boasts a high capacity for generating free cash flows, supporting the sustainability of dividends. The continuation of this policy depends on profitability levels and future oil prices, alongside the company's investment and expansion plans.

In response to the global shift towards clean energy, Aramco has intensified its investments in renewable energy projects. In 2024, the company announced the development of solar energy projects with a total capacity of 5.5 gigawatts, in addition to entering green hydrogen projects (HUMAIN project) and expanding natural gas investments (Jafurah project). These steps aim to diversify income sources and reduce reliance on crude oil, in line with Vision 2030. This strategy also reflects the national direction to leverage the Kingdom's position in both traditional and new energy markets.

Saudi Aramco's stock is traded on the Saudi financial market (Symbol: 2222) at levels ranging between 23 and 25 riyals per share by the end of 2025, with a market capitalization of approximately 1.5–1.6 trillion riyals. The price-to-earnings (P/E) ratio is around 20–25, a balanced level reflecting the stability of the company's earnings despite market fluctuations. The annual dividend yield is approximately 3–4%, making the stock attractive to investors seeking stable income. The stock has experienced limited volatility compared to the rest of the market and is significantly linked to today's oil price, alongside the company's quarterly results and investment policies.

The years 2024 and 2025 witnessed a series of significant developments in the Saudi oil sector. Aramco announced strong and stable financial results, completed strategic agreements such as the acquisition of the HUMAIN green hydrogen project, and sold a stake in the Jafurah gas project to an international consortium. The company also continued its investments in renewable energy projects and closed financial deals for massive solar projects. On the international policy front, Saudi Arabia played a leading role in continuing production cuts within OPEC+ to support oil prices. These developments highlight the Kingdom's commitment to maintaining its leadership position in both traditional and new energy markets.

Despite the strength of the Saudi oil sector, investors face a range of risks associated with fluctuations in global oil prices, changing environmental policies and international regulations, and increased global investments in renewable energy. Additionally, the heavy reliance on oil makes the national economy sensitive to any changes in global demand or prices. Despite Aramco's strong financial position, monitoring the company's reports, OPEC policies, and market news is essential for risk assessment. It is important for investors to carefully analyze financial indicators, distributions, and the company's future trends, and consult specialists before making any financial decisions.

As the global shift towards clean energy continues, Saudi Arabia is expected to continue diversifying its economy and investments in renewable energy and natural gas. Today's oil price will remain a key factor in determining the trajectory of the Saudi financial market and the performance of major companies. Additionally, Aramco's and national companies' ability to adapt to changes and invest in modern technologies will determine how well Saudi Arabia maintains its leadership position in energy markets. This requires continuous monitoring of market developments, international policies, and major investment project advancements.