Brent Price: The Key Indicator in the Saudi Oil Market

Brent crude is a type of light oil extracted from the North Sea and is classified as one of the most important benchmarks for oil pricing globally. Brent price is used as a primary reference for pricing more than two-thirds of global oil production, especially in Europe, Africa, and most Middle Eastern crudes. In Saudi Arabia, although the state relies on its local crudes such as Arab Light, the pricing of these crudes is often determined by formulas based on Brent or a mix between it and other indicators like Oman crude. The importance of Brent price lies in its reflection of global supply and demand balances and its use in oil futures contracts and financial hedges, making it a sensitive indicator to market fluctuations and geopolitical events. Monitoring Brent price provides investors and economic decision-makers with an accurate view of energy market trends and aids in financial planning, especially in economies that primarily depend on oil like Saudi Arabia.

Brent price witnessed notable fluctuations during 2024 and 2025 due to changes in global demand and geopolitical events. At the beginning of 2024, Brent price averaged a high of $80 per barrel according to Fitch's forecasts, supported by expectations of demand growth and continued rising gas prices. By mid-year, Brent reached a peak of around $82 per barrel before gradually declining as supply stabilized and global demand decreased by the end of 2024 and the beginning of 2025. In the latest available data, Brent price approached $61.07 per barrel within a daily trading range of $61.2 to $62.73 and an annual range between $58.4 and $82.63. These fluctuations reflected on the results of Saudi oil companies, which benefited from high prices in the first and second quarters of 2024 before revenues relatively declined with the price drop in the second half of the year. This data underscores the importance of monitoring Brent price as an indicator of the oil market's condition and its direct impact on the Saudi economy.

In the Saudi financial market (Tadawul), there is no stock or company that directly represents Brent crude; rather, Brent price is viewed as a standard that affects the performance of the entire energy sector. For example, Saudi Aramco significantly relies on Brent price movements for its financial results, as its revenues are tied to average global selling prices. Petrochemical companies and refineries are also affected by changes in crude oil costs. An increase in Brent price typically leads to higher profits for oil-exporting companies, while a decrease may pressure their profit margins. Additionally, the Saudi budget largely depends on oil price forecasts, making Brent monitoring essential for both investors and decision-makers in the Kingdom. It is worth noting that trading Brent as a financial asset is not directly available in Tadawul, but its impact is clearly reflected in the performance of listed companies connected to the energy sector.

Brent price is influenced by a range of global factors, the most significant of which include:
1. Global Supply: OPEC+ decisions regarding production levels, particularly by Saudi Arabia and Russia, play a pivotal role in determining oil supply.
2. Global Demand: Growth or slowdown in major economies such as China, India, Europe, and the USA affects the demand for oil.
3. Geopolitical Events: Tensions in the Middle East or sanctions on producing countries like Russia and Iran increase uncertainty and drive prices up.
4. Oil Inventories: Inventory data in the US and Europe reflects market conditions; rising inventories often indicate weak demand or increased supply, and vice versa.
5. Currency Prices: Since oil is priced in dollars, the strength or weakness of the dollar against other currencies affects the cost of oil for buyers worldwide.
6. Energy Transition: Global policies for transitioning to alternative energy may impact long-term demand for oil, putting pressure on Brent price in the future.
All these factors make Brent price a complex indicator that requires careful monitoring by investors and stakeholders.

Saudi energy companies, led by Aramco, are directly affected by global Brent price movements. When the price rises, the value of oil exports increases, enhancing the profitability of Aramco and related companies such as SABIC and refineries. Petrochemical companies also benefit from increased profit margins due to higher prices of oil-based final products. Conversely, a decline in Brent price pressures the profits of these companies and impacts their cash distributions and performance in the stock market. Additionally, Saudi fiscal policy largely relies on oil revenues, making the public budget susceptible to Brent fluctuations. Therefore, monitoring Brent price is essential for investors in the Saudi stock market and those interested in the energy sector.

The global crude oil sector is one of the largest economic sectors, with Saudi Arabia playing a pivotal role as one of the largest producers and exporters. Saudi Arabia is characterized by its ability to produce oil at low costs ($8–10 per barrel), granting it flexibility in facing price fluctuations compared to countries with higher production costs like the USA and Canada. Saudi Arabia, in alliance with Russia, leads the OPEC+ organization, which controls production quotas to maintain market balance. In recent years, there has been continuous coordination to keep oil prices at levels that achieve financial balance for member countries. At the same time, Saudi Arabia is striving under Vision 2030 to diversify its income sources and reduce reliance on oil, but it still primarily depends on oil revenues determined by Brent price. The Saudi oil sector enjoys strengths including high-quality oil, advanced infrastructure, and ease of export, but it faces challenges due to its heavy reliance on global prices.

Although Brent is the most important benchmark for oil pricing in Europe and the Middle East, there are other global oil benchmarks that play a parallel role. West Texas Intermediate (WTI) is the primary benchmark for oil in the US market and often trades at a slight price differential compared to Brent due to differences in quality and transportation costs. Oman and Dubai crudes are used as price indicators for oil in Asia, and Aramco often bases its pricing for Asian market exports on a mix of Brent and Oman. The OPEC basket aggregates the prices of the member countries' crudes and serves as an additional indicator. In the Saudi market, these benchmarks indirectly influence the pricing formulas for exported Saudi oil, but they do not directly compete with Brent in determining futures contract prices or official sale contracts.

The years 2024 and 2025 witnessed significant changes in the oil market that affected Brent price. Early 2024 saw optimism about demand growth, prompting Fitch to forecast an average price of $80 per barrel. OPEC+ extended production cuts to support prices, while global demand varied with some economies recovering and others like Europe slowing down. Aramco announced slight changes in official selling prices (OSP) based on market trends. Geopolitical tensions in the Arabian Gulf temporarily affected prices due to supply disruption fears. By the end of 2024 and the beginning of 2025, supply increased and demand relatively declined, leading to a drop in Brent price to the sixties range. Saudi authorities closely monitor OPEC+ meetings and developments in US and Iranian production, as any increase in supply could pressure prices in the future.

The Saudi budget heavily relies on oil revenues determined by Brent price. To achieve financial balance, the Saudi government typically needs Brent price to range between $70–80 per barrel. A price increase above these levels results in a financial surplus, allowing for increased spending on national projects and improved public services. Conversely, a price drop forces the government to implement austerity measures or resort to financing deficits through debt or drawing from reserves. Therefore, decision-makers in the Ministry of Finance and the Central Bank closely monitor Brent price developments, relying on it for preparing annual budgets and estimating future revenues. Investors are also interested in Brent price as it serves as an indicator of national economic strength and available market liquidity.

Brent price can be monitored through several reliable platforms and sources. Locally, the 'Argaam' website provides real-time updates on Brent crude price in the commodities and metals section, along with periodic analyses of market developments. Globally, platforms like Investing.com, Bloomberg, and Reuters offer updated data on Brent futures contracts and market trend analysis. Aramco also announces its official selling prices for crude monthly, based on Brent and Oman averages. It is also important to follow OPEC data, International Energy Agency reports, and financial and geopolitical news that impact price movements. Professional investors may also use specialized financial applications or futures trading platforms to monitor Brent movements in real-time.

Brent price is one of the most important factors influencing the performance of Aramco's stock listed on Tadawul (symbol: 2222). Aramco's profits are directly linked to Brent price movements, as every dollar increase in the price per barrel reflects on the company's revenues and net profits. When Brent rises, Aramco's stock performance typically improves due to expectations of increased profits and cash distributions to shareholders. Conversely, a price decline may pressure the company's financial results and affect investor sentiment in the Saudi financial market. For this reason, analysts and investors closely monitor Brent price developments when analyzing Aramco stock or estimating its fair value. However, it should be noted that the stock price is also influenced by other factors such as operational efficiency, government policies, and global fluctuations.

Specific predictions for Brent price cannot be provided according to the Capital Market Authority's regulations, but it is important to highlight the fundamental scenarios that analysts are monitoring. Continued production coordination by OPEC+, global demand growth or slowdown, geopolitical developments, and increased supplies from alternative sources such as US shale or the return of Iranian oil to markets are all factors that could drive Brent price up or down. International reports indicate Brent price moving within the sixties to seventies range in 2025, with the possibility of change depending on economic and political conditions. Investors and financial institutions prefer to monitor monthly and quarterly data rather than relying on long-term forecasts, emphasizing the importance of diversifying information sources and making informed decisions based on realistic foundations.

Although direct buying or selling of Brent crude is not available through Tadawul, investors can gain exposure to Brent price changes indirectly. Some of the most notable methods include:
- Investing in shares of major oil companies like Saudi Aramco, as Brent movements directly affect their profits and stock price.
- Trading futures contracts or options on Brent through licensed global platforms, which is an option available to qualified investors under the Capital Market Authority's regulations.
- Investing in exchange-traded funds (ETFs) that track global oil performance, although most are traded in global markets rather than locally.
- Monitoring local investment funds that focus on the energy sector or petrochemical companies linked to oil prices.
It is crucial to emphasize the importance of consulting a financial specialist before making any investment decisions in complex products like futures contracts or oil derivatives.