Crude Oil Price: Comprehensive Analysis of Oil Prices and Their Impact

The crude oil price is defined as the price at which a barrel of oil is sold in global markets, determined by the interaction of supply and demand forces between producers (such as Saudi Arabia, Russia, and the United States) and consumers (such as China, Europe, and India). This price is typically measured through two main indicators: Brent crude, which reflects prices in European markets, and West Texas Intermediate (WTI), which represents the U.S. market, while the Saudi market also relies on what is known as the Official Selling Price (OSP) set by Aramco monthly for its customers in Asia and Europe.

Crude oil prices play a pivotal role in the Saudi economy, representing over half of the Kingdom's GDP and forming the primary source of government budget financing. Any change in oil prices, whether rising or falling, directly impacts the government's ability to finance major projects, pay public sector salaries, and support sovereign funds such as the Public Investment Fund.

To clarify further, when oil prices rise, state revenues increase, and local liquidity rises, allowing for increased spending on infrastructure, housing, education, and health projects. Conversely, in the event of a downturn, the government may have to reduce spending, borrow, or draw from reserves. This, in turn, leads to cascading effects on the Saudi financial market (Tadawul), where the stock prices of industrial companies, such as cement firms, are linked to macroeconomic performance and government spending levels.

Additionally, crude oil price serves as a key indicator of investor sentiment in the Kingdom and the region, used in financial analysis to estimate the profitability of industrial companies and forecast their future performance. Therefore, crude oil price is viewed in the Saudi market as a strategic tool that determines growth and investment trends across various economic sectors.

Crude oil prices are subject to a complex set of factors that interact daily in global markets. The first of these factors is the balance of supply and demand, where rising global demand—driven by economic growth in industrial and developing countries—leads to price increases, while declining demand, as seen during pandemic lockdowns or economic recessions, results in price drops.

On the supply side, decisions made by the Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ alliance, led by Saudi Arabia and Russia, are among the most significant influences. In cases of increased or decreased production based on collective agreements, global supply can be rapidly altered, immediately reflecting on prices. For example, in 2024, OPEC+ witnessed repeated agreements to reduce production to support prices amid demand fluctuations and geopolitical tensions in the Middle East.

Geopolitical factors also play a prominent role. Any disruption in major oil-producing regions—whether due to armed conflicts, economic sanctions, or attacks on infrastructure—can lead to a sudden spike in prices due to fears of supply shortages. Additionally, technological developments, especially in shale oil extraction in the United States, affect the supply side as they can increase available quantities and lower prices during certain periods.

There are also influential economic factors such as inventory levels in consuming countries, growth forecasts for major economies, and fuel support or tax policies. At the Saudi level, the government closely monitors these factors to estimate its revenue needs and adjust its financial policies.

In summary, crude oil price is determined by a dynamic mix of macroeconomic elements, producer decisions, and geopolitical and technological developments, each leaving its mark on price movements continuously and daily.

Crude oil prices are a fundamental driver of trends in the Saudi financial market (Tadawul), as government revenues and market liquidity largely depend on oil export returns. When oil prices strengthen, the government's capacity to finance large projects increases, leading to a boom in sectors such as construction, petrochemicals, basic materials, and financial services. This boom supports the performance of listed stocks and enhances the market's attractiveness to local and international investors.

During periods of rising oil prices, an increase in liquidity traded in the markets is typically observed, along with a rise in market indicators such as TASI. Industrial companies, especially those directly or indirectly linked to the oil sector, benefit from increased demand for their products, while construction and cement companies receive a significant share of new government projects. For instance, companies like Hail Cement see a rise in demand for their products and benefit from investment flows into housing and infrastructure projects.

Conversely, when oil prices sharply decline, government revenues decrease, forcing relevant authorities to reconsider spending plans, postpone, or reduce some major projects. This directly reflects on the performance of industrial companies, which may face declining demand or pressure on profit margins due to rising energy costs. Investor confidence is also affected, leading to fluctuations in stock prices.

It is noteworthy that the oil sector in Saudi Arabia does not operate in isolation from other sectors; its impact flows through all aspects of the economy. Therefore, monitoring crude oil price is a fundamental step for any financial or economic analysis related to the Saudi market.

Oil prices experienced notable fluctuations during 2024 and 2025 due to multiple influencing factors on supply and demand, in addition to global political and economic events. At the beginning of 2024, Brent crude started trading at relatively high levels ranging between $80 and $90 per barrel, supported by production cuts from the OPEC+ alliance and geopolitical tensions in the Middle East. These factors pushed prices close to $90 per barrel in the first quarter of the year.

As we moved into mid-2024, prices began to stabilize within the range of $75-$85 per barrel, attributed to adjustments in OPEC+ production plans and signs of slowing economic growth in some advanced markets, particularly in Europe. This relative stability was also supported by declining inventories in some consuming countries, keeping prices at moderately elevated levels.

By the end of 2024, markets saw a slight return to rising prices, driven by renewed economic growth expectations in Asia and declining inventory levels in some industrialized countries. At the beginning of 2025, prices continued to move within the range of $80-$90 per barrel, with OPEC+ continuing to monitor markets and adjust production as needed.

On the Saudi front, the state budget for 2024 required an average oil price between $80 and $85 per barrel to achieve fiscal balance, prompting the market to closely monitor any price movements. High prices helped reduce the government budget deficit and increase financial surpluses, allowing for increased investments in strategic and infrastructure projects.

Clearly, crude oil price remained a sensitive indicator reflecting market forces, directly impacting government financial policies and the level of economic activity in the Kingdom.

The cement sector in Saudi Arabia is one of the largest non-oil industrial sectors, heavily relying on infrastructure and housing projects funded by the government. The profitability of cement companies such as Hail Cement is directly affected by fluctuations in crude oil prices through two main channels: production costs and demand for the final product.

On the cost side, the cement industry relies on energy-intensive sources such as natural gas, fuel oil, and electricity—all closely linked to oil prices. When oil prices rise, energy costs increase, leading to higher production costs per ton of cement. This can pressure companies' profit margins if they cannot pass on these increases to selling prices. Conversely, during periods of declining oil prices, companies benefit from lower energy costs, positively impacting their profitability.

On the demand side, rising oil prices typically lead to increased government spending on housing and infrastructure projects, boosting demand for cement and enhancing local companies' sales. For example, 2024 saw a strong return of construction projects due to increased state revenues from oil, reflected in rising demand for cement and improved results for sector companies.

However, it should be noted that the relationship is not always linear, as sharp increases in oil prices can lead to general inflationary pressures, affecting project costs and potentially delaying some. Overall, crude oil price remains one of the most important determinants of the performance of the Saudi cement sector, significantly influencing companies' ability to achieve profits and provide attractive distributions to shareholders.

Hail Cement Company (symbol 3001) is a leading player in the Saudi cement sector, and its financial performance reveals its sensitivity to crude oil prices and macroeconomic trends. In 2024, the price of Hail Cement's stock reached levels close to 220 Saudi Riyals, with an estimated market value of 6.6 billion Riyals, based on the number of shares listed in the market (approximately 30 million shares).

The company's price-to-earnings (P/E) ratio is an important indicator for assessing the stock's attractiveness. During periods of rising oil prices and flourishing government projects, the company's profits increased, with some Saudi cement companies recording P/E ratios between 8 and 15. If, for example, earnings per share are 20 Riyals, the P/E ratio would be around 10, indicating a reasonable valuation of the stock compared to the cement sector overall.

In terms of liquidity and trading volume, it is noted that Hail Cement's stock trades at a lower pace than some major companies, but experiences increased liquidity during periods of strong financial results announcements or generous dividend distributions. In 2024, the company distributed hypothetical cash dividends estimated at 8 Riyals per share, representing a cash return of about 4% if the stock price is 200 Riyals.

Factors influencing the stock's performance include rising or falling energy costs, local demand for cement, and competition levels with other cement companies. Overall, data shows that Hail Cement's performance during 2024 and 2025 was stable, achieving balanced profits thanks to ongoing infrastructure projects supported by oil revenues, despite some seasonal pressures on profit margins due to price fluctuations.

The Saudi cement sector comprises approximately 10-12 major companies listed in the Saudi financial market, competing to meet the increasing demand for real estate and infrastructure projects in the Kingdom. Among the most prominent of these companies are Saudi Cement (3010), Yamama Cement (3040), Najran Cement (3000), Qassim Cement (3040), and Hail Cement (3001). According to Argaam reports for the second quarter of 2024, five of these companies accounted for nearly 49.5% of the market share in the sector, indicating a moderate concentration in the hands of some leading companies, while competition continues in various geographical areas.

The total production capacity of the sector is tens of millions of tons annually, with factories spread across the Kingdom to cover local demand, with limited exports to neighboring countries. Most production is directed to meet housing projects, new cities, and infrastructure projects under the Kingdom's Vision 2030. With the revival of these projects in 2024 due to rising oil prices, the sector witnessed growth in sales volume and profits.

Regarding financial performance, Saudi cement companies reported combined profits exceeding 2 billion Riyals in the first nine months of 2024, with a profit for the third quarter of approximately 648 million Riyals. However, the second quarter of 2024 saw a slight decline in profits by 11% from expected levels due to pressures on energy costs or temporary slowdowns in some projects.

Companies are striving to enhance their competitiveness by expanding production lines, improving operational efficiency, and utilizing cheaper or environmentally friendly energy alternatives. Pricing policies and geographical distribution also play a role in stabilizing local prices and preventing excessive fluctuations. In summary, the Saudi cement sector remains balanced between competitive strength and macroeconomic support resulting from rising crude oil prices.

Geopolitical factors are among the most significant determinants affecting crude oil prices, as any political or security development in major production areas can lead to sharp price fluctuations. The Middle East represents the global center of oil production, and any disruptions in this region—whether military conflicts, attacks on oil facilities, or economic sanctions on major producing countries like Iran or Russia—drive markets to raise prices in anticipation of supply shortages.

In 2024 and 2025, oil markets witnessed several geopolitical events that had a direct impact on prices. For example, political tensions in the region and increased security risks in the Strait of Hormuz led to a temporary rise in oil prices due to fears of supply chain disruptions. Additionally, sanctions imposed on Russia due to regional conflicts led to a redistribution of oil flows and changes in supply-demand balances, especially in European markets.

Saudi Arabia plays a pivotal role in achieving balance in the oil market through the OPEC+ alliance, cooperating with its partners to adjust production and respond to any sudden market shocks. In some cases, the Kingdom makes individual decisions to raise or lower production to protect its economic interests and ensure market stability.

Moreover, developments in international relations—such as nuclear agreements with Iran or changes in energy policies in Europe and America—affect investor expectations and are immediately reflected in crude oil prices in spot and futures markets. Therefore, monitoring geopolitical news and analyses is essential for understanding crude oil price movements and their impact on the Saudi economy.

The Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ alliance are among the most important players in the global oil market, collectively determining production policies that directly affect crude oil prices. The OPEC+ alliance includes OPEC countries as well as several major producers outside the organization, such as Russia, with Saudi Arabia being one of the key leaders in this alliance.

In recent years, particularly during 2024 and 2025, OPEC+ played a crucial role in achieving balance between global supply and demand. When the market experienced an oversupply due to declining demand or increased production from non-OPEC countries, the alliance made decisions to cut production to support prices. For example, several meetings in 2024 agreed to reduce or stabilize production levels in response to market fluctuations, contributing to keeping Brent prices within the range of $80-$90 per barrel.

OPEC+ decisions are based on precise market analyses, including assessing global inventory levels, economic growth forecasts, and expected demand from industrialized and emerging countries. Conversely, when prices rise significantly or a supply shortage emerges, the alliance can gradually increase production to avoid price shocks that negatively impact global economies.

Saudi policy plays a critical role in guiding OPEC+ decisions, as the Kingdom seeks to maintain a balance between achieving high oil revenue and ensuring long-term market stability. Thus, OPEC+ policies are a fundamental element in managing crude oil prices, directly affecting the ability of producing countries, such as Saudi Arabia, to achieve their economic and financial goals.

The Saudi public budget is closely linked to crude oil prices, as a significant portion of state revenues relies on oil sales. In 2024, the Saudi budget required an average oil price between $80 and $85 per barrel to achieve a balance between revenues and expenditures. Any drop below this level would lead to a financial deficit necessitating borrowing, drawing from reserves, or reducing spending.

During periods of rising oil prices, the government achieves financial surpluses used to fund mega-projects such as NEOM, the Red Sea project, and the expansion of major city infrastructures. These surpluses enhance the state's ability to invest in strategic sectors such as education, health, and renewable energy. For instance, the rise in oil prices in 2024 helped reduce the 2023 budget deficit and increase investment flows into national vision projects.

Conversely, in the event of price declines, the government may find itself compelled to reconsider spending priorities, postpone some non-urgent projects, or impose limited austerity measures. This directly impacts sectors such as construction, cement, and basic materials, where demand for industrial products declines as spending on projects is curtailed.

It is noteworthy that the Saudi government is working to diversify income sources and reduce dependence on oil through Vision 2030, yet crude oil prices remain the primary benchmark determining the level of government spending and investment in the local economy. Therefore, monitoring oil price developments remains essential for understanding trends in the Saudi economy and the future of strategic projects.

Saudi Arabia, within the framework of Vision 2030, aims to diversify energy sources and reduce dependence on oil by investing in renewable energy projects such as solar and wind energy. This gradual transition aims to create a more sustainable economy and achieve a balance between environmental sustainability commitments and revenue generation.

For the cement sector, the shift towards renewable energy represents both an opportunity and a challenge. On one hand, utilizing cheaper and environmentally friendly energy sources may reduce cement production costs, especially amid rising oil and traditional fuel prices. Indeed, some Saudi cement companies, including Hail Cement, have begun exploring the potential of using solar energy or biogas to operate kilns and reduce carbon emissions.

In the medium term, this transition may improve profit margins and reduce sensitivity to fluctuations in crude oil prices, especially if government support for clean energy projects continues. Additionally, global trends towards emission reductions may compel companies to adapt to stricter environmental standards, placing pressure on less energy-efficient companies.

However, oil remains the primary energy source in the Kingdom for now and will continue to influence production costs in the cement sector for years to come. Therefore, companies' ability to adapt to ongoing changes in the energy sector will determine their capacity to maintain profitability and expand in the future.

In conclusion, the shift towards renewable energy represents a strategic step that could enhance the competitiveness of the Saudi cement sector and gradually reduce its reliance on crude oil prices as a primary cost determinant.

The second half of 2024 and the beginning of 2025 witnessed a series of impactful events in the Saudi oil and cement market. Globally, OPEC+ continued its periodic meetings to assess market conditions, extending some production cuts to ensure price stability amid demand fluctuations and increasing inflationary pressures in some major economies. Discussions about imposing new sanctions on certain producers also recurred, leading to temporary increases in crude oil prices.

At the local level, the Kingdom benefited from rising oil prices in enhancing financial surpluses, positively reflecting on the level of investment spending in major projects such as NEOM and Vision 2030 initiatives. These projects contributed to pushing cement demand to high levels, with the cement sector recording strong combined profits exceeding 2 billion Riyals during the first nine months of 2024.

Regarding Hail Cement Company, recent financial data showed stability in performance and improvement in profit margins, supported by increased local demand and an improved operational environment. The company is currently working on raising its production capacity and enhancing factory efficiency while closely monitoring any changes in government energy policies that may affect future operating costs.

On the renewable energy front, the Kingdom has launched new initiatives to enhance the use of solar and wind energy in the industrial sector, representing a step towards reducing reliance on oil and alleviating operational costs for the cement sector.

Finally, challenges remain, including the risks of demand slowdown in the event of rising interest rates or sharp fluctuations in oil prices. However, the overall trend remains supportive of the growth of the cement sector amid continued government support and major investments driven by oil surpluses.