Brent Crude: The Global Benchmark and Its Impact on Saudi Markets

Brent Crude is a blend of crude oil extracted primarily from North Sea fields located between the United Kingdom and Norway. It is characterized by its lightness and low sulfur content, making it highly desirable in the global refining industry. Brent Crude got its name from the "Brent" field discovered in the 1970s and later became a benchmark for pricing more than two-thirds of the oil contracts traded globally. Most oil transactions, especially in Europe, Africa, and Asia, are priced relative to Brent Crude, granting it a strategic position in energy markets.

The importance of Brent Crude lies in its reflection of global supply and demand balances for energy, providing an immediate indicator of market developments. Long-term contracts and futures contracts for oil are closely linked to it, and companies, governments, and financial institutions monitor its changes daily. In Saudi Arabia, despite relying on local crudes for pricing, Brent prices remain a reference when budgeting and analyzing the performance of major oil companies.

Brent Crude is distinguished by physical characteristics that make it preferred in refining operations, as it is classified among light crudes with a high specific gravity (API gravity close to 38) and a low sulfur content (less than 0.4%). These attributes facilitate its processing and conversion into high-quality petroleum derivatives such as gasoline and diesel.

Commercially, Brent Crude is primarily traded on the Intercontinental Exchange (ICE) in London, and its prices are used to price over 60% of global oil sales. Contracts are often settled financially without actual delivery of barrels, making Brent Crude an effective financial instrument for speculation and hedging against energy price fluctuations. Financial institutions, investment funds, and oil companies monitor these prices to determine their financial and operational strategies.

Brent Crude emerged as a crude oil blend in the early 1970s following the discovery of the Brent field in the North Sea. It quickly became a pricing benchmark due to its geographic location, quality, and ease of transport to European markets. Throughout the 1980s and 1990s, futures markets developed, and Brent became a key indicator in most international oil contracts.

With the increasing global demand for oil, the use of Brent Crude expanded to include markets in Asia and Africa, especially after some local crudes began to be priced based on Brent averages. This shift coincided with the evolution of financial commodity exchanges and the diversification of trading instruments linked to the crude, reinforcing its status as a primary indicator for assessing trends in the international energy market.

Although Saudi Arabia prices its crude oils (such as light, medium, and heavy Arab crudes) according to specific formulas and the official selling price (OSP), Brent prices are taken into account when preparing these formulas, especially for exports to European markets. Fluctuations in Brent prices indirectly affect the official selling prices of Saudi oil and the revenues of major oil companies.

Saudi investors monitor Brent prices to anticipate the performance of local energy companies listed on the Saudi financial market, led by Aramco. The performance of shares in the Saudi oil sector is significantly linked to fluctuations in Brent prices, making close monitoring of this benchmark essential for understanding local and global market dynamics.

The energy sector tops the list of sectors influencing the overall index of the Saudi financial market (Tadawul), with Brent Crude serving as a fundamental reference in evaluating the performance of this sector. The profits of major Saudi oil companies, such as Aramco, SABIC, and Yansab, are affected by global Brent price levels. When Brent prices rise, these companies' revenues often increase, enhancing their ability to distribute cash dividends to shareholders.

Conversely, any decline in Brent prices pressures profit margins and affects the balance sheets of companies. Additionally, oil price fluctuations play a pivotal role in shaping Saudi government policies and its estimates of non-oil revenues, reflecting on investment trends and government spending.

There are several global benchmarks for pricing crude oil, most notably Brent Crude, West Texas Intermediate (WTI), and Oman Crude. Brent Crude is used to price most European and Asian transactions, while WTI is the benchmark for oil in the United States, characterized by being lighter and lower in sulfur than Brent. Oman Crude, on the other hand, is the primary benchmark for pricing oil destined for Asia and is considered closer in characteristics to Arab crudes.

The price of Brent typically differs from WTI by a certain margin depending on geopolitical conditions, supply and demand, and storage capacities in each region. Oman Crude has recently become an important alternative benchmark in Asian pricing, especially after Aramco adopted it for pricing its exports to Asia. Despite these differences, the prices of these crudes remain closely aligned in general trends and influence each other.

Brent Crude prices are subject to several key variables, including:

1. Global supply and demand: Brent prices are affected by increases or decreases in supplies from producing countries and changes in demand from industrialized and emerging nations.
2. OPEC+ policies: Decisions to cut or increase production by OPEC and its allies directly impact price levels.
3. Geopolitical tensions: Regional conflicts, sanctions on producing countries, and disruptions lead to fears of supply interruptions, driving prices up.
4. Global oil reserves: Increases or decreases in inventories in the United States and Europe affect the spot price of Brent.
5. Dollar exchange rate: Since oil is priced in dollars, a stronger dollar exerts negative pressure on Brent prices.

In addition to these factors, technological developments in U.S. shale oil production and investments in renewable energy also influence Brent market dynamics in the long term.

Brent Crude is a fundamental factor in determining Saudi Arabia's oil revenues, which represent the largest share of state income. Fluctuations in Brent prices affect the state budget, levels of government spending, and investment trends in infrastructure and national development programs.

At the company level, the performance of listed companies in the energy sector, such as Aramco and SABIC, is closely linked to Brent Crude price trends. Rising prices enhance the financial results of companies, while declines reduce profits and cash distributions. Brent prices also impact other energy-related sectors such as petrochemicals, transportation, and logistics.

The year 2024 witnessed notable fluctuations in Brent Crude prices, ranging between $70 and $90 per barrel, with significant increases in the first and second quarters due to OPEC+ decisions to cut production and a slowdown in Russian supplies. In early 2025, prices stabilized around the mid-seventies. These prices reflected on the results of Saudi Aramco, which recorded revenues of approximately $62 billion in the fourth quarter of 2024, supported by rising oil prices.

Aramco's market capitalization exceeded 2.3 trillion Saudi Riyals (about $615 billion), with an annual dividend yield of around 5-6%. Despite a decline in quarterly profits compared to the same period last year due to price fluctuations and production costs, the overall performance remained strong due to high Brent price levels. This data confirms the close correlation between Brent prices and the performance of major Saudi energy companies.

In the global market, West Texas Intermediate (WTI) is the main competitor to Brent Crude, especially in North America. In the Asian market, Oman and Dubai crudes emerge as important benchmarks for oil pricing. Some countries rely on local or regional benchmarks, but Brent Crude remains the primary reference in most international transactions.

In Saudi Arabia, despite relying on a pricing system based on local crudes, Brent prices are used as a reference indicator when evaluating the performance of major oil companies and comparing their results with international peers. Major global oil companies such as ExxonMobil, Shell, and Rosneft also play a role in determining market dynamics, but they do not directly compete with Aramco in the Saudi market.

Brent Crude prices during 2024-2025 were affected by several significant events, including:

- OPEC+ decisions to repeatedly cut or stabilize production to maintain high price levels.
- The recovery of the global economy and increased fuel demand as the effects of the COVID-19 pandemic wane.
- Geopolitical tensions, especially in the Middle East and Ukraine, which raised fears of supply disruptions.
- The expansion of U.S. shale oil production, which sometimes pressured prices before OPEC+ intervention.

Locally, Aramco announced a gradual shift to using Oman Crude as a reference for pricing its exports to Asia, reflecting a trend to diversify pricing benchmarks, without diminishing Brent's importance as a primary global indicator.

The world is gradually moving towards investing in renewable energy sources such as hydrogen, solar energy, and wind energy, which may lead to a decline in oil demand growth in the long term. However, crude oil, especially Brent Crude, will continue to play a pivotal role in the global economy for decades to come, given the ongoing demand for petroleum products in industrial and transportation sectors.

In Saudi Arabia, the government seeks to enhance its investments in clean energy as part of Vision 2030, but oil remains the primary source of revenue. Brent prices are expected to continue being influenced by traditional factors of supply and demand and OPEC+ policies, alongside developments in alternative energy, with limited immediate effects on oil prices so far.

Monitoring Brent Crude prices is essential for investors and followers of the energy sector. Real-time price data is available through global financial sites such as Bloomberg and Reuters, as well as commodity trading platforms like ICE. In Saudi Arabia, platforms like Tadawul and Argaam provide regular updates on oil prices and their impact on the local market.

Economic media also publish regular reports on OPEC decisions, market developments, and expert analyses regarding price forecasts. It is advisable to rely on official and reliable sources when following Brent Crude news to form an accurate picture of market trends.