Oil in the Saudi Financial Market: Recent Analyses and Comprehensive Economic

Oil is a mixture of liquid hydrocarbon compounds extracted from the earth and is the most important component of the Saudi economy. The Kingdom of Saudi Arabia holds a leading position among oil-producing and exporting countries, with revenues from this sector constituting the largest share of the state’s general budget. Oil is not merely an export commodity; it is central to economic policy, funding major development projects, supporting social welfare programs, and directing government investments. Oil prices directly impact government revenues, and price fluctuations are reflected in spending levels within the Kingdom, thereby affecting the performance of the Saudi financial market. This significance has made oil a strategic focus in Saudi Vision 2030, as the government seeks to diversify income sources and reduce future dependence on oil.

Saudi Arabia possesses one of the world’s largest proven oil reserves, exceeding 250 billion barrels. The Kingdom’s maximum oil production capacity is about 12 million barrels per day, but actual production in recent years has ranged between 9 and 10 million barrels per day, depending on OPEC+ agreements and production cut decisions. Saudi oil exports rank first globally and are a major source of foreign currency. The Kingdom is also working to enhance the oil value chain by developing refineries and petrochemical industries to maximize returns and reduce risks associated with price volatility. Domestic oil consumption is rising with population growth and industrial expansion, prompting the government to adopt balanced policies between exports and meeting internal demand.

Saudi Aramco (Tadawul symbol: 2222) is the world’s largest oil company by market value and production. In 2025, its market capitalization reached around $1.75 trillion, making it the largest component of the Saudi market index (Tadawul). Aramco is responsible for the majority of Saudi oil production and manages refining and distribution operations both domestically and internationally. Aramco’s financial results reflect the health of the Saudi oil sector, recording net profits of $121 billion in 2023 and $26 billion in Q1 2025. Aramco’s dividend distributions affect market liquidity, with the company announcing dividends of SAR 76.10 billion in 2024. The company maintains a generous dividend policy due to its alignment with state fiscal policy, making Aramco shares highly attractive to investors seeking regular returns.

Global oil prices are determined by supply and demand mechanisms, as well as geopolitical and economic considerations. In 2024, Brent crude averaged about $80 per barrel, fluctuating between $70 and $90. OPEC+ decisions, led by Saudi Arabia and Russia, play a key role in managing supply and supporting prices. Other factors such as global economic growth, renewable energy policies, and political developments (like the Ukraine war) also contribute to price volatility. Oil prices directly impact the Saudi budget, as government revenues are primarily linked to global price levels, which in turn affect government spending and the performance of the local stock market.

Saudi Arabia is a leading member of the OPEC+ alliance, which includes the world’s major oil producers. Through this alliance, the Kingdom participates in setting collective production policies to balance global supply and demand and support prices within a targeted range. In 2024, Saudi Arabia agreed to continue reducing its production by about one million barrels per day as part of OPEC+ efforts to support the market. The alliance has also contributed to price stability during periods of global turmoil. OPEC+ decisions directly affect Saudi oil revenues, and consequently, local market liquidity and the level of government investments.

The oil sector is the main driver of the Saudi stock market indices (Tadawul). When oil prices rise, oil and petrochemical companies’ profits increase, positively impacting stock prices and market liquidity. Conversely, falling prices lead to lower profits and reduced dividends, as seen in 2024 and 2025 when Aramco’s profits fell by about 12% due to lower prices and weaker refining margins. This effect extends to other sectors through its impact on government spending and public investments, as the government tends to reduce spending during periods of lower oil revenues. Therefore, understanding the relationship between oil prices and the financial market is essential for tracking developments in the Saudi market.

In addition to Aramco, Tadawul includes many companies whose operations are linked to the oil sector, such as petrochemical firms (SABIC, Yansab, National Industrialization), refineries, and energy retail companies. These companies benefit from access to competitively priced crude oil and profit from exporting refined and petrochemical products. Nevertheless, Aramco remains the largest player in terms of market weight and revenues. Other companies are often affected by fluctuations in raw material prices and energy costs, making their financial results closely tied to the dynamics of the local and global oil market.

Recent financial data show a decline in Aramco’s profits due to lower oil prices and weaker refining margins. In 2023, the company’s net profit was $121 billion, compared to $161 billion in 2022. In Q1 2025, profits amounted to $26 billion (down 4.6% from the same period the previous year). The share price was around SAR 27, with dividends of SAR 0.3145 per share in Q1 2024. Aramco’s price-to-earnings (P/E) ratio is relatively high compared to previous years, reflecting expectations of slower profit growth. Nevertheless, the company remains among the world’s top in dividend yield. These indicators make Aramco shares a key benchmark for measuring the performance of the oil sector in the Saudi market.

Saudi Arabia faces strong competition from major global oil producers such as Russia, the United States (shale oil), and giants like ExxonMobil and Chevron. It also competes with Gulf oil companies from the UAE, Kuwait, and Qatar. Despite this competition, Saudi Arabia retains an advantage due to its vast reserves and low production costs, enabling it to manage the market during crises. Domestically, competition focuses on enhancing added value through downstream and petrochemical industries rather than crude production alone. The Kingdom also faces environmental challenges and growing global pressure to transition to clean energy, prompting investments in renewable energy and green hydrogen projects.

The Saudi oil sector witnessed several significant developments in 2024 and 2025. Saudi Arabia announced the continued reduction of its production under OPEC+ and decided not to raise production capacity to 13 million barrels per day as previously planned, reflecting a commitment to market balance. Aramco’s profits declined for several consecutive quarters, impacted by lower global prices. Conversely, Saudi Arabia is investing heavily in new clean energy projects, such as blue and green hydrogen, and new refineries in Jubail to enhance added value. These strategic moves aim to strengthen economic resilience and reduce risks associated with oil price volatility.

The Saudi oil sector faces a number of future challenges, most notably the global shift toward renewable energy, environmental pressures, and price volatility resulting from changes in global demand. Competition with US shale oil and alternative energy sources poses challenges to Saudi Arabia’s global market share. Domestically, economic diversification under Vision 2030 is a major challenge to reduce reliance on oil as the main revenue source. The Kingdom needs to develop new downstream industries, enhance energy consumption efficiency, and invest in technological innovation to maintain its leadership in the energy sector.

Saudi Arabia has adopted Vision 2030 to diversify the economy and reduce dependence on oil. These strategies include investing in renewable energy projects (solar and wind), developing green hydrogen projects, and stimulating non-oil industries such as mining and tourism. The state is also developing refinery and petrochemical infrastructure to maximize the added value of crude oil. These initiatives aim to create new job opportunities, enhance financial sustainability, and achieve long-term economic growth independent of global oil price fluctuations.

To keep up with developments in the oil sector and the Saudi market, it is recommended to rely on official and reliable sources such as Saudi Aramco’s quarterly and annual reports, data from the Saudi Ministry of Energy, OPEC and International Energy Agency reports, as well as economic media outlets like Argaam and AP News. These sources provide accurate analyses and up-to-date data on production, prices, policies, and investment developments in the sector, helping followers form a comprehensive view of the current state and future of Saudi oil.