Oil Prices: Their Importance and Impact on Saudi Markets

The oil price is the price at which a barrel of crude oil is traded in global markets, typically measured by key benchmarks such as Brent for European oil and West Texas Intermediate (WTI) for American oil, in addition to specific Asian market indicators like the Oman index. In Saudi Arabia, the oil price is a key benchmark not only in macroeconomics but also in evaluating the performance of companies listed on the Saudi financial market (Tadawul), with Saudi Aramco at the forefront. The selling price of Saudi oil for Asian customers is often calculated as a percentage of the average Brent and Oman prices, while Aramco announces official selling prices (OSP) monthly according to international standards. These prices directly affect state revenues, profits of oil and petrochemical companies, and liquidity available in Tadawul. Understanding how oil prices are determined and their global fluctuations is essential for anyone studying or following the Saudi market, as price movements are immediately reflected in the results of related companies and impact the overall market index.

Oil occupies a leading position in the Saudi economy, contributing about half of the gross domestic product and accounting for over 70% of government revenues. When oil prices rise, the state's ability to spend increases, improving liquidity in the financial system, which supports both public and private investments, and positively reflects on the performance of major stocks like Saudi Aramco. Conversely, a decline in oil prices leads to a contraction in government revenues, often resulting in austerity measures or cuts in spending, affecting various economic sectors. Saudi oil policy is one of the most influential on the global stage, with the Kingdom playing a pivotal role in the OPEC+ alliance, which controls a significant portion of global supply and thus price determination. Any change in oil prices leads to shifts in the state budget, cash reserves, and even in the direction of foreign and domestic capital towards the Saudi stock market.

The relationship between oil prices and Saudi stock market indices (Tadawul) is closely intertwined. For instance, the energy and petrochemical sectors constitute the largest share of market capitalization in Tadawul, with Aramco's stock being a key component of the overall index. Rising oil prices often lead to increased profits and cash distributions from Aramco, positively reflecting on the stock price and raising the overall index. Conversely, a decline in prices results in reduced profitability for oil companies and decreased distributions, putting pressure on related stock prices and negatively affecting the market as a whole. Additionally, the liquidity generated by the oil sector often spreads to other sectors, supporting overall growth in the Saudi economy. Therefore, monitoring oil prices and predicting their movements is fundamental when analyzing the performance of the Saudi financial market and investor trends.

Global oil prices experienced notable fluctuations during 2024 and 2025, with the average price of Brent oil reaching around $80 per barrel by the end of 2024, while prices fluctuated within the range of $75-$85 in 2025. These fluctuations are attributed to several key factors, including OPEC+ decisions regarding production, the full return of Russian production, and changes in global demand, especially with the easing of shipping disruptions and the return of industrial activity in Asia and Europe. These factors directly impacted the financial results of Saudi oil companies, particularly Aramco, which reported a decline in profits due to falling prices and weak refining margins, despite relatively stable revenues compared to previous years. Monitoring recent data and global market developments remains essential for understanding the dynamics of oil price impacts on the Saudi financial market.

Saudi Aramco is the largest oil company in the world by market capitalization and production, playing a pivotal role in the Saudi financial market. By the end of 2025, the stock price was approximately 32 Saudi Riyals, with the company's market capitalization estimated at around 5.885 trillion Riyals. The price-to-earnings (P/E) ratio was about 16.11 times, reflecting a decline in profits compared to previous years. The dividend yield stood at 6.33%, one of the highest rates in the market. In the third quarter of 2024, Aramco reported a net profit of $27.6 billion, down 15.4% from the same period in 2023, due to lower average prices and weak refining margins. For the full year 2024, net profit reached $106.3 billion, a 12% decline from 2023, with revenues nearing $436 billion. These figures confirm that Aramco's results are primarily linked to movements in global oil prices, and any change in prices is immediately reflected in its financial performance and stock price in Tadawul.

The oil and gas sector in the Kingdom of Saudi Arabia is the most significant in the national economy and in Tadawul. Saudi Arabia possesses vast reserves and low production costs, giving operating companies, led by Aramco, a high competitive edge. The sector is characterized by a fully integrated value chain from exploration to refining and distribution, and is subject to the influences of OPEC+ decisions and global energy policies. On the other hand, the sector faces increasing challenges with the global shift towards clean energy and rising investments in renewable energy sources. In response to these developments, Aramco is investing heavily in gas projects, petrochemicals, and carbon capture technologies, while enhancing its role in manufacturing industries in line with Saudi Vision 2030. Nevertheless, the sector remains vulnerable to price fluctuations and geopolitical risks, necessitating sustainable strategic planning to balance profitability with the requirements of economic transformation.

Despite Aramco's significant dominance in crude oil, several Saudi companies operate in closely related or complementary fields, such as SABIC (2010) in petrochemicals, National Industrialization (2060), and oil service and logistics companies. SABIC is one of the largest chemical companies globally and relies primarily on oil derivatives for its production, having been fully owned by Aramco since 2020. Companies like National Industrialization and others operate in petrochemicals, manufacturing, and energy infrastructure services. However, no Saudi company matches Aramco in crude oil production or market capitalization, giving it a monopolistic position in the local market, while competition remains fiercest at the regional and international levels with major global oil companies like ExxonMobil, Shell, and Chevron.

The Organization of the Petroleum Exporting Countries (OPEC) and the OPEC+ alliance play a pivotal role in determining global production ceilings and thus directly influencing oil prices. As the largest producer in OPEC, Saudi Arabia leads most agreements related to production cuts or increases in coordination with Russia and other countries. In 2024, the alliance continued to cut production to support prices, with Saudi production reduced by more than one million barrels per day compared to maximum capacity. This policy led to relative price stability, but with declining global demand in late 2024, prices faced downward pressure again. In 2025, these policies continued with readiness to adjust based on market conditions. This approach reflects the importance of coordination between the government and major companies like Aramco in facing market fluctuations and its impact on the results of listed companies and the overall Tadawul index.

In the third quarter of 2024, Aramco announced a net profit of $27.6 billion, a decrease of 15.4% from the same quarter in 2023, attributed to lower average oil prices and weak refining margins. Revenues for this quarter reached approximately $111.1 billion, while annual net profit by the end of 2024 was around $106.3 billion, compared to $120.8 billion in 2023, representing a decline of about 12%. Annual revenues for 2024 stabilized at $436 billion, compared to $440.9 billion in the previous year. These data reflect the direct impact of falling oil prices on Aramco's financial performance and illustrate the company's sensitivity to changes in global market conditions.

Aramco is one of the most committed companies to a regular dividend policy, with a dividend yield of about 6.33% in 2024. In December 2025, the company announced a dividend distribution of 0.46 Riyals per share for the third quarter, comprising both base and performance-linked distributions. With declining profits in 2024, the company moved to reduce planned dividends for 2025 to $85.4 billion compared to $124 billion in 2024, reflecting the company's focus on cash flow management and sustainable investment amid market fluctuations. The dividend policy is one of the attractive factors for investors seeking stable income, but it remains contingent on financial performance and oil price expectations.

Aramco continued to invest heavily in natural gas, petrochemicals, and clean energy technologies such as carbon capture in 2024-2025. Investments included expanding gas facilities in Jazan, enhancing international partnerships with Asian countries, and acquiring strategic assets abroad. The company also focused on improving refinery efficiency and developing high-value products to mitigate the impact of carbon fees in European and American markets. This strategy aligns with Saudi Vision 2030, which aims to diversify national income sources and reduce dependence on crude oil as the sole revenue source. These initiatives positively reflect on the company's resilience and ability to adapt to structural changes in the global energy market.

One of the most significant challenges facing the Saudi oil sector is the accelerating global shift towards renewable energy and carbon emission reduction technologies. With European and American governments committing to impose carbon fees and incentivize investment in clean energy, oil companies are required to develop innovative solutions to maintain competitiveness. Aramco, for its part, has invested in carbon capture and storage technologies, alongside developing natural gas and petrochemical projects. Nevertheless, forecasts indicate that global demand for oil will remain high until mid-century, particularly from emerging markets in Asia. However, addressing climate change and legislative transformations requires the Saudi sector to continue updating and investing in alternative energy sources to ensure sustainable growth.

For accurate and reliable data on oil prices and company performance in the Saudi financial market, several official sources can be relied upon: the Tadawul website, which provides real-time information on stock prices and listed companies; Argaam, which offers comprehensive financial analyses; quarterly and annual reports of Aramco published on its official website; and data from the Saudi Capital Market Authority. Additionally, global news agencies such as Reuters and Bloomberg provide updates on global market developments and oil prices. It is always advisable to use official and accredited sources to ensure the accuracy of information when analyzing market performance or following financial developments.