Oil in the Saudi Financial Market: Comprehensive Analysis

In the Saudi financial market, the term oil encompasses the entire oil industry, from the extraction of oil and natural gas to the refining and marketing of petroleum products. The oil sector falls under the classification of energy and utilities in the Saudi Capital Market Authority, including companies and activities directly or indirectly related to the production, transportation, and distribution of oil and its derivatives. Oil is the primary source of national income in the kingdom, with the state budget heavily reliant on oil export revenues, contributing more than half of total national exports. The oil and gas sector accounts for approximately 40-50% of Saudi Arabia's GDP and constitutes about two-thirds of government revenues. The Saudi financial market (Tadawul) derives much of its momentum from the performance of oil sector companies, where the level of liquidity and market valuations of energy stocks are closely linked to global oil prices and national production policies. Oil plays a pivotal role in stabilizing the Saudi economy, as well as being a significant factor in support policies, economic development, and future planning.

Saudi Arabia maintained its position as the world's largest oil exporter during 2024 and 2025, with average daily production ranging between 9 and 10 million barrels. The majority of this production was exported to Asia and Europe, with China and India being the largest importers of Saudi oil. Saudi Arabia accounts for about 18% of global oil exports, with proven oil reserves exceeding 260 billion barrels, granting it significant influence in the global oil market. This massive production capacity enables the kingdom to adapt to fluctuations in supply and demand through mechanisms such as OPEC+ agreements, where Riyadh plays a leading role in shaping collective production policies to stabilize prices and balance the market. Domestically, energy demand is gradually rising with the expansion of development projects, while state investments continue to enhance energy infrastructure. The stability of production and exports positively reflects on government revenues and the public budget, reinforcing Saudi Arabia's position as a global oil power and a primary driver of the national economy.

Crude oil prices are characterized by sharp fluctuations, with significant movements observed during the 2024-2025 period due to global geopolitical and economic events. At the beginning of 2024, Brent crude prices exceeded $110 per barrel, before declining to below $80 by the end of the year, and stabilizing in 2025 within the range of $80–90 per barrel. These changes directly affect Saudi government revenues, profits of national oil companies, and energy sector stock prices on Tadawul. Rising prices typically lead to increased profits for oil companies and improved market valuations, while declines result in reduced profits and impacts on energy sector indices. The importance of government policies and OPEC+ in managing production levels to balance financial returns and market stability is highlighted. Additionally, oil prices influence investment decisions in infrastructure projects and reflect on investor sentiment in the Saudi financial market as they anticipate any changes in global energy prices.

As economic growth continues in Saudi Arabia and industrial and urban projects expand, domestic energy demand has risen moderately in recent years. Oil remains the primary energy source in the kingdom, with the industrial and transportation sectors heavily reliant on petroleum products. However, the Saudi government is keen to implement strategies aimed at diversifying energy sources and reducing total dependence on oil, in line with Vision 2030. These strategies include enhancing the use of natural gas, investing in renewable energy projects such as solar and wind, and developing green hydrogen technologies. This diversification seeks to strengthen the national economy against fluctuations in global oil prices and achieve long-term sustainability in the energy sector. It also aims to improve energy consumption efficiency and reduce carbon emissions, thereby enhancing Saudi Arabia's position as a regional energy hub in the future.

The oil sector is the cornerstone of the Saudi economy, contributing about 65% of total public budget revenues and fueling nearly half of national infrastructure investments. Economic development in the kingdom heavily relies on oil revenues, which fund infrastructure projects, education, healthcare, and major government initiatives such as Vision 2030 projects. Oil also plays a key role in supporting the Saudi riyal and stabilizing the financial system, as oil revenues provide substantial cash reserves that support financial liquidity and monetary policies. The oil sector contributes to providing direct and indirect job opportunities and is the main driver of manufacturing industries such as petrochemicals and refining. Nevertheless, the Saudi government aims to reduce reliance on oil by diversifying income sources and encouraging investment in other sectors.

Saudi Aramco is the largest oil company in the world by market value and production, serving as the backbone of the oil industry in the kingdom. Aramco controls most stages of the oil value chain, from exploration and production to refining, distribution, and marketing. The company is listed on Tadawul under the symbol 2222, with the Saudi government owning the majority of its shares (over 90%). The price of Aramco's stock in the first quarter of 2025 is approximately 33 riyals, with a market value ranging between 7.5 and 8 trillion Saudi riyals. Aramco is characterized by a generous dividend distribution policy, with a yield of about 4.5% annually in 2024. Despite the challenges posed by fluctuations in global oil prices in recent years, the company has continued to achieve substantial profits while adopting expansion plans in refining, petrochemicals, and renewable energy. Aramco's financial results are a key indicator of the performance of the energy sector in the Saudi market, and its investments and innovations directly impact the future of the oil industry both locally and globally.

During 2024 and 2025, Saudi Aramco continued to maintain its position as the highest-valued oil company in the world. The average stock price on Tadawul ranged between 31 and 36 riyals, with a market value between 7.5 and 8 trillion Saudi riyals. The company's price-to-earnings (P/E) ratio was 11–13 times, which is relatively low compared to other major oil companies, reflecting market expectations for sustainable cash distributions. The company recorded revenues of approximately 168 billion riyals and a net profit of around 48 billion riyals in the third quarter of 2024. The fourth quarter of the same year saw revenues of about 170 billion riyals and a net profit between 50 and 55 billion riyals. Throughout 2023, total revenues reached approximately 800 billion riyals, with a net profit of 161.1 billion riyals. Aramco's profits saw a significant decline in 2024 due to falling oil prices and production cuts under OPEC+ agreements. Nevertheless, the cash distribution policy remained strong, with a distribution yield of about 4.5% annually, enhancing the stock's appeal to investors seeking stable cash flows.

The energy sector, specifically oil, constitutes the largest part of the Saudi financial market and is characterized by several key features. Aramco dominates crude oil production and controls national production policies. The sector's performance depends on a set of determinants, including global oil prices, OPEC and producing countries' policies, geopolitical conditions, and global energy demand rates. The sector is industrially integrated, extending from crude extraction to refining, petrochemical production, and oil services. Aramco has invested in developing new refineries and advanced manufacturing complexes, enhancing the value of the production chain. On the policy front, the kingdom is working within the framework of Vision 2030 to promote economic diversification and reduce reliance on oil by encouraging investment in renewable energy and manufacturing industries. In terms of market structure, government entities intervene to regulate prices and liquidity when necessary, while the sector's performance remains sensitive to international and regional changes.

Despite Aramco's dominance in crude oil production in Saudi Arabia, there are local and regional companies playing significant roles within the oil value chain. Notable among them is SABIC (Saudi Basic Industries Corporation), the largest petrochemical company listed in the Saudi market, along with companies like National Industrialization Company and Petro Rabigh. These companies focus on converting oil and its derivatives into high-value chemical products. Regionally, Aramco competes with major national oil companies such as ADNOC in the UAE and Qatar Energy in global markets. Competition also arises with international oil companies in terms of exports and technologies. Additionally, local oil service companies contribute to supporting the industry without directly competing with Aramco in crude extraction. This competitive environment reflects the importance of industrial integration and activity diversification within the Saudi energy sector.

The Saudi oil sector witnessed several important developments during 2024 and 2025. The kingdom continued to coordinate with the OPEC+ alliance to regulate production levels to stabilize prices. Aramco announced quarterly financial results showing a decline in profits due to falling oil prices and production cuts, but it maintained a strong dividend distribution policy. In terms of investments, the company expanded into gas and green hydrogen projects, particularly in NEOM, alongside developing new refineries both domestically and internationally. Aramco formed partnerships with global companies to develop clean energy technologies and petrochemical projects. Government efforts continue to achieve the carbon neutrality goal by 2060, with investments in renewable energy and carbon capture technologies being doubled. In the financial market, energy sector stocks fluctuated in line with oil price volatility, while regulatory bodies intervened to ensure financial stability when necessary.

Geopolitical factors play a pivotal role in determining the performance of the Saudi oil sector and global oil prices. Recent years have seen events such as attacks on oil facilities, regional tensions in the Middle East, and the war in Ukraine, leading to sharp fluctuations in oil prices. Saudi Arabia responds to these challenges by enhancing the security of oil infrastructure and developing emergency and rapid response capabilities. The kingdom's foreign policy also contributes to building international alliances to ensure the stability of energy markets. These factors directly impact state revenues, valuations of oil companies on Tadawul, and the sentiment of local and international investors. The ability to address geopolitical challenges remains a significant competitive advantage for the Saudi oil sector, supporting the stability of the national economy in the face of global changes.

With the growing global interest in sustainability and carbon neutrality, Saudi Arabia has begun to take serious steps towards transitioning to renewable energy sources. The government has launched major initiatives under Vision 2030 aimed at increasing the contribution of solar and wind energy to the national energy mix. Aramco and other national companies are developing green hydrogen projects and investing in carbon capture technologies. Although oil will remain the foundation of the Saudi economy for years to come, this transition represents a long-term strategy to ensure economic growth continuity and reduce risks associated with fluctuations in oil prices. It also enhances the kingdom's competitiveness in global energy markets and positions it to become a regional hub for renewable energy and clean technologies.

Investment decisions in oil sector stocks are influenced by several key factors, including fluctuations in global oil prices, financial results of companies, dividend policies, and future government trends. Saudi Aramco is an example of a company that offers high dividends, attracting income-seeking investors. Conversely, changes in global oil demand, the shift towards renewable energy, and geopolitical fluctuations may affect growth and profit expectations. Financial indicators such as the price-to-earnings ratio and dividend yield also play a role in assessing stock attractiveness. It is important for investors to understand the risks associated with the sector, monitor financial disclosures and market news, and not rely solely on price forecasts when making investment decisions.

The oil sector in Saudi Arabia is overseen by the Capital Market Authority, which establishes rules and regulations governing the trading of securities and financial disclosures for listed companies. Oil companies, led by Aramco, are required to transparently announce their quarterly and annual financial results. Regulatory bodies monitor market movements and intervene to ensure stability and prevent sharp fluctuations. Government policies support sector investments through financial facilitation and tax incentives, focusing on enhancing transparency and protecting investor rights. Additionally, the government seeks to balance achieving financial returns with implementing national programs to diversify the economy and reduce reliance on oil. This regulatory framework contributes to supporting sector growth and ensuring its attractiveness to local and international investors.