Brent Crude: Global Indicator and Its Impact on Saudi Markets

Brent Crude is a global oil classification extracted from the North Sea, characterized by its physical and chemical properties that make it suitable for refining and producing various types of fuel and petroleum products. Brent is distinguished by its low sulfur content (less than 0.37%) and medium specific gravity, classifying it as light sweet crude. These characteristics make Brent a preferred choice for many refineries worldwide, especially in Europe, Africa, and parts of Asia. Brent is used as a pricing benchmark for more than two-thirds of global oil contracts, with most oil exports from Europe, Africa, and the Middle East priced based on it. This is due to its high liquidity and the diversity of buyers and sellers in its market. In financial markets, Brent is directly linked to futures contracts traded on the Intercontinental Exchange (ICE) in London, with its price determined daily based on supply and demand assessments and market forecasts. Historically, Brent became an international benchmark in the 1970s following disruptions in Middle Eastern supplies, and as markets evolved, its reliance as a reference standard increased even in regions geographically distant from the North Sea. The impact of Brent extends beyond crude oil trading to include pricing for natural gas, petrochemical products, and even some electricity contracts in European markets. Many central banks and sovereign wealth funds also rely on Brent prices as a key economic indicator when formulating financial policies. In Saudi Arabia, Brent not only serves as a benchmark for pricing oil exported to European countries but also acts as a primary indicator for measuring public budgets and estimating state revenues. All these factors reflect Brent's status as one of the most important economic indicators globally and its profound impact on the Saudi economy and local financial markets.

The price of Brent Crude is influenced by several intertwined factors that make its fluctuations common in global markets. The first of these factors is global oil supply and demand, where the production policies of OPEC member countries and the OPEC+ alliance play a pivotal role. When these countries decide to increase or decrease production, it immediately reflects on oil supply, leading to price increases or decreases. For instance, in 2024, OPEC+ made repeated decisions to cut production to counteract price decline pressures due to a slowing global economy, contributing to Brent prices stabilizing within the range of $70-85 per barrel.

The second factor is the global economic situation; strong economic growth in Asia, Europe, and North America means increased demand for oil, while periods of recession lead to reduced demand and lower prices. Additionally, geopolitical events play a prominent role; conflicts in major production areas (such as the Middle East or Russia) can disrupt supplies and sharply raise prices.

The fourth factor is global oil inventories, where weekly inventory reports, especially those from the United States, affect market expectations. A decline in inventories is often interpreted as a sign of strong demand, which raises prices.

Moreover, advancements in shale oil production technologies in the United States and the increasing reliance on renewable energy sources influence supply and demand dynamics and shape new price forecasts. Finally, financial speculation plays a role in increasing volatility, as large investors exploit news and data to achieve quick profits from price changes.

All these factors demonstrate how the price of Brent Crude reflects a complex interaction between politics, economics, and technology, making its monitoring essential for understanding the movements of the economy and the Saudi financial market.

The price of Brent Crude has experienced sharp fluctuations over the past decades due to a mix of economic, political, and technical factors. In the 1970s, oil prices rose unprecedentedly due to the Arab oil embargo in 1973 and the Iranian revolution in 1979, with barrel prices exceeding $35, a record at that time. At the beginning of the 1980s, the market saw a significant increase in production from outside OPEC, particularly from the North Sea, which temporarily suppressed prices. In the 1990s, Iraq's invasion of Kuwait and the Gulf War led to a sudden spike in prices, followed by a gradual decline due to increased production and geopolitical calm.

In the early 21st century, global demand for oil surged due to economic growth in China and India, pushing Brent prices to new record levels, exceeding $140 per barrel in 2008 before the global financial crisis brought them back to below $40. Prices gradually rose again until 2014, before collapsing again due to the U.S. shale oil boom and OPEC's decision not to cut production, leading prices to drop below $30 in 2016.

The COVID-19 pandemic in 2020 caused an unprecedented demand shock, with prices plummeting below $20 for limited periods, before beginning to recover as restrictions eased and economic activity resumed. In 2024-2025, prices stabilized relatively within the range of $70-85 per barrel, driven by OPEC+ efforts to manage supply and a cautious global balance between economic growth and geopolitical tensions. Understanding these historical milestones helps to grasp the sensitivity of Brent Crude to any global variable and highlights the importance of monitoring this indicator for the Saudi financial market.

Brent Crude forms the cornerstone of the economic policy of the Kingdom of Saudi Arabia, where state revenues are closely linked to global oil prices, specifically those priced based on Brent. In 2024, oil revenues account for approximately 40-50% of total government revenues, according to reports from the International Monetary Fund and the Saudi Ministry of Finance. The annual state budget primarily relies on Brent price estimates, as every $1 increase in the average price per barrel translates to billions of riyals in additional revenues, impacting the size of public spending and the ability to finance large developmental projects under Vision 2030.

Brent also affects investments of Saudi sovereign wealth funds, most notably the Public Investment Fund, which relies on oil price forecasts to determine investment strategies and economic diversification. Additionally, Brent prices are indirectly linked to unemployment and inflation rates in the Kingdom; rising prices increase government spending on salaries and social support, while declines may lead to reduced public expenditures.

Non-oil industries such as petrochemicals, metals, and construction are also affected by Brent price fluctuations, as they depend on available market liquidity and the volume of government investments in infrastructure. During periods of rising prices, industrial sectors experience notable growth due to increased local and global demand, while these sectors may slow down in the event of price declines. Finally, Brent plays a pivotal role in determining government energy support policies, which directly affect production costs in heavy industries such as cement and steel. All these aspects confirm that Brent Crude is not merely a pricing indicator but a fundamental element in shaping the economic and developmental policies of the Kingdom.

The impact of Brent Crude price fluctuations is clearly manifested in the performance of the Saudi financial market (Tadawul), as there is a close correlation between rising or falling oil prices and local stock indices, especially those listed within the energy, petrochemicals, and banking sectors. On the company level, shares of Saudi Aramco and petrochemical sector companies like SABIC move in tandem with changes in Brent prices, as rising prices indicate increased expected profits and thus higher stock prices. Conversely, periods of declining oil prices weaken investor confidence, which reflects a decrease in the overall market index value.

The effect of Brent extends to non-oil sectors through what is known as the "secondary effect"; rising oil prices enhance liquidity in the Saudi financial system, prompting banks to increase lending and expand financing activities, encouraging companies to implement new expansion projects. Additionally, increased government revenues reflect an increase in spending on infrastructure and housing projects, leading to a boom in construction material sectors such as cement and steel.

On the other hand, Brent fluctuations affect the sentiments of both foreign and local investors, as stability in oil prices is a key factor in attracting foreign investments to the Saudi market. Finally, Brent prices influence profit distribution policies and investment expansion for market companies, as firms tend to adopt more generous profit distribution policies during periods of rising oil prices, and vice versa during downturns. All this highlights the necessity of monitoring Brent Crude movements as a fundamental element for reading the Saudi financial landscape and anticipating sector dynamics.

Although the cement sector is not directly affected by oil price changes like the energy and petrochemical sectors, Brent Crude has a strong indirect effect on the Saudi cement industry. Rising global oil prices often lead to increased revenues for the Saudi government, enabling it to expand spending on major infrastructure projects, such as roads, housing, and government facilities, where cement is a key component.

During 2024-2025, the Kingdom witnessed the launch of several mega projects under Vision 2030, such as NEOM City, Red Sea projects, and the development of central Riyadh, leading to increased local demand for cement. This construction boom is closely linked to rising oil prices, as government capacity to finance these projects increases with them. On the other hand, cement plants rely heavily on energy for burning and operation, often obtaining part of their needs through government-subsidized fuel. If oil prices rise and subsidies are reduced, energy costs for cement plants may increase, reflecting on the final product prices.

Changes in Brent prices may also affect transportation and shipping costs, especially if fuel prices rise, increasing the cost of transporting cement to project sites. Conversely, a decline in oil prices may reduce production costs, but it may coincide with a decrease in government spending, thus reducing the volume of new projects and consequently the demand for cement. Overall, the Saudi cement sector remains indirectly linked to Brent price fluctuations through their impact on government spending and energy costs, making monitoring Brent developments essential for observing the performance of this sector.

Hail Cement Company was established in the Hail region of northern Saudi Arabia to meet the growing demand for cement in the northern and central areas, which are experiencing rapid urban growth under regional development plans. The company is listed on the Tadawul market under the symbol (3001), and it began its production operations in recent years, making it one of the newest players in the Saudi cement sector.

Hail Cement targets supplying major infrastructure projects in the region, such as developing new cities, residential projects, and public facilities, in addition to meeting the needs of the private sector from small and medium contracting companies. The company relies on modern production lines with advanced technologies that ensure energy efficiency and reduce environmental emissions, enhancing its competitiveness in the local market.

Despite its recent establishment, Hail Cement has managed to build a wide customer base by offering a variety of products, including ordinary Portland cement and sulfate-resistant cement, which meet the requirements of major projects in alkaline soil areas. Additionally, the proximity of its factories to major project sites in northern Saudi Arabia gives it a logistical advantage in reducing transportation costs compared to competing companies in the south or west.

Financially, Hail Cement has witnessed gradual growth in sales since the start of its production lines, and it is currently seeking to enhance its profits by improving operational efficiency and exploring export opportunities to nearby markets such as Iraq and Jordan. The company is committed to the financial disclosure and governance standards imposed by the Saudi Capital Market Authority and works to publish its financial results periodically to enhance investor confidence. All this makes Hail Cement an example of modern industrial companies benefiting from the boom in government projects supported by oil revenues linked to Brent Crude prices.

The financial performance of Hail Cement Company during 2024 and 2025 has shown notable developments reflecting the dynamics of the Saudi cement sector. According to the latest financial reports published on the Tadawul website, the company recorded revenue growth due to increased local demand for cement, supported by ongoing government projects under Vision 2030. The average share price in mid-2024 was approximately X Saudi Riyals, while the market value ranged between X and X billion Riyals depending on market fluctuations and the number of outstanding shares.

In terms of profitability, the company's price-to-earnings (P/E) ratio was around 12-15, which is close to the sector average for Saudi cement companies. This indicates that the market views Hail Cement as a company with relatively stable growth, although it is still in the early stages of its operational lifecycle. The company has not announced any dividends by the end of 2025, reflecting management's intention to reinvest profits into expanding production lines and improving operational efficiency.

Regarding costs, the company benefited from government energy support; however, fluctuations in Brent crude prices may affect fuel costs in the future if support policies change. The company has maintained reasonable levels of debt, which mitigates the risks associated with rising interest rates. On the cash flow side, the company recorded positive cash flows due to improved sales and collection of receivables.

Hail Cement remains required to continue financial disclosure and adhere to governance standards to enhance investor confidence, especially as the cement sector faces intense competition and relies heavily on government infrastructure projects linked to oil revenues. Overall, the company's financial performance reflects its ability to adapt to market conditions, while cost and demand challenges remain in light of Brent price fluctuations.

The Saudi cement sector represents one of the pillars of the industrial economy in the Kingdom, meeting the growing demand for construction materials through a wide network of companies spread across all regions. The sector includes leading companies such as Arabian Cement, City Cement, Umm Al-Qura Cement, Yamama Cement, and Saudi Cement, along with new players like Hail Cement. The size of the Saudi cement market is estimated at over 50 million tons annually, with expectations for its growth in line with Vision 2030 projects.

Competition in the sector is intense, as producers compete for government and private contracts, with each company striving to achieve a competitive edge through improved operational efficiency and cost reduction. Companies rely heavily on government energy support, which helps them maintain competitive prices compared to neighboring markets. However, any changes in support policies or rising Brent prices may affect profit margins.

On the other hand, major government projects, such as NEOM and Red Sea projects, put pressure on the sector's production capacity and create opportunities for sales growth. Additionally, the shift towards exporting to regional markets provides companies with an opportunity to diversify income sources, especially with rising demand in Iraq, Yemen, and some African countries.

Challenges include seasonal demand fluctuations, rising transportation costs if fuel prices increase, and new regulatory measures imposing higher governance and transparency standards. Additionally, the presence of excess production capacity in some years puts pressure on prices, requiring companies to continue innovating and managing costs efficiently. Overall, the Saudi cement sector remains a promising sector but faces challenges that require flexible strategies to keep pace with market fluctuations and macroeconomic conditions linked to Brent Crude.

The cement industry in Saudi Arabia is characterized by being energy-intensive, as its burning, grinding, and transportation operations heavily rely on conventional fuels such as natural gas and fuel oil. Energy prices, particularly those linked to Brent Crude, directly affect production costs in cement companies. When global oil prices rise, the government may raise domestic energy prices or reduce subsidies, leading to a direct increase in operational costs for factories.

For example, Saudi cement companies have recently experienced rising energy expenses following adjustments to subsidy policies under the government's financial balance plan. As a result, some companies have had to raise their product prices or improve energy consumption efficiency to mitigate the negative impact on profit margins. Conversely, during periods of declining oil prices, companies benefit from stable or lower energy prices, enhancing their competitiveness and allowing them to offer more competitive prices for major projects.

Technological developments play a role in addressing energy price fluctuations, as some companies invest in alternative energy solutions such as solar energy or reusing heat generated from industrial processes. Additionally, improving operational efficiency and reducing waste have become key factors in maintaining sector profitability. It is worth noting that transportation costs represent a significant portion of the total cement cost and are also closely linked to fuel prices.

Ultimately, the interaction between Brent Crude prices and local energy policies remains a critical factor in determining the profitability of Saudi cement companies, compelling them to adopt flexible strategies to adapt to rapid changes in the global energy environment.

The Saudi financial market (Tadawul) has recently witnessed a series of regulatory developments aimed at enhancing transparency and protecting investor rights, in line with international standards. The Saudi Capital Market Authority has focused on updating financial disclosure regulations and mandating listed companies, such as Hail Cement, to publish detailed quarterly and annual reports that include financial data, operational performance, and technical reports.

Additionally, the financial market has launched advanced governance standards, requiring company boards to adopt sound management practices that ensure the disclosure of risks and future strategies. These measures aim to raise the level of confidence in the Saudi market and attract more foreign investments, especially in light of the market's inclusion in global emerging market indices.

Furthermore, a monitoring system for trading has been developed to ensure price fairness and prevent any manipulation or exploitation of insider information. These regulations have encouraged companies to enhance their internal compliance programs and train employees on best practices for disclosure and transparency. Hail Cement has benefited from this regulatory environment by improving the quality of its financial reports and enhancing communication with investors.

These developments positively reflect on the overall market performance, as they provide investors with accurate and reliable information that facilitates their investment decisions. Moreover, companies' commitment to transparency enhances the market's ability to withstand external shocks, such as sharp fluctuations in oil prices. In conclusion, regulatory transparency remains a fundamental factor in sustaining economic growth and the attractiveness of the Saudi financial market, especially in sectors closely linked to Brent Crude.

Saudi Vision 2030 serves as a major catalyst for economic growth and industrial transformation in the Kingdom, as the government has launched several major projects such as NEOM, the Red Sea Project, and the development of central Riyadh. The financing of these projects heavily relies on oil revenues derived from the Kingdom's exports priced based on Brent Crude, making stability in Brent prices a vital element for ensuring the sustainability of government investment spending.

In 2024 and 2025, relatively stable Brent prices (between $70-85 per barrel) provided a conducive environment for launching more developmental projects, as the pace of contracts awarded to contracting and construction material companies, including cement companies like Hail Cement, increased. For instance, the Hail region witnessed the initiation of new urban and industrial projects that benefited the company through cement supply contracts.

Moreover, high oil revenues enable the government to support housing programs and social projects, increasing demand for construction materials and stimulating growth in the cement sector. On the other hand, future Brent price forecasts influence private sector investment decisions, as investors tend to expand during periods of oil optimism.

As the Kingdom moves towards economic diversification, the industrial sector in general, and the cement sector in particular, remain among the primary beneficiaries of stability in Brent prices. However, non-oil sectors still need to develop more flexible business models to cope with any future fluctuations in oil prices. Ultimately, it is clear that the success of Vision 2030 is partially linked to Saudi Arabia's ability to manage its oil revenues and optimally benefit from Brent Crude returns.

Brent Crude prices face a set of challenges in the near future that may affect their stability and range of movement. The first of these challenges is the balance between global supply and demand, as OPEC+ continues its cautious policies in managing oil production, while the United States and other countries continue to increase shale oil production. Any change in this dynamic could lead to a sudden rise or sharp drop in prices.

The second challenge lies in geopolitical developments, such as conflicts in the Middle East, sanctions on Iran and Russia, or supply disruptions in major production areas. These events often lead to sharp price fluctuations, requiring markets to prepare for waves of uncertainty.

The third factor is the shift towards renewable energy and increasing investments in alternatives such as solar and wind energy, which may gradually reduce global oil demand, especially in European and American markets. Forecasts from the International Monetary Fund and the International Energy Agency indicate that the average Brent price may range between $75-85 per barrel in 2024, with a slight increase in 2025 if the current balance continues.

Additionally, global economic forecasts impact oil demand, as any economic slowdown or global recession could put downward pressure on prices. Conversely, a rapid recovery in emerging markets may support demand and push prices up. Finally, financial speculation plays an increasing role in determining spot and future Brent prices, heightening volatility. Overall, the future of Brent Crude remains contingent on a range of changing factors, requiring companies and investors to closely monitor global developments.

Investing in the Saudi financial market, especially in sectors linked to oil such as energy, petrochemicals, and construction materials, is a widely appealing option among local and international investors. However, Brent Crude price fluctuations necessitate adherence to investment principles based on caution and deep risk analysis. Rising oil prices often lead to increased profits for government and private companies, which reflects on dividends and stock prices. Conversely, sharp declines in prices may result in reduced financial results and asset repricing.

The Saudi Capital Market Authority recommends that investors stay informed about companies' periodic disclosures, review official financial reports, and avoid relying on rumors or unreliable forecasts regarding Brent price movements or company performance. Investors should also diversify their investment portfolios and not focus solely on one sector, especially given the numerous global factors that may affect oil prices and related sectors.

It is also important to monitor government policies regarding support and tax exemptions, as well as developments in Vision 2030 projects, as these factors can significantly impact companies' profitability. Finally, it is advisable to consult a licensed financial advisor before making any investment decisions, especially in light of the sharp fluctuations that Brent Crude prices may experience. This way, investors can manage risks and achieve their financial goals in a constantly changing market environment.