Saudi Arabia’s labor market booms as world wakes up to its potential

Saudi Arabia’s labor market booms as world wakes up to its potential
Women are stepping into roles across diverse sectors, contributing to the Kingdom’s broader economic transformation goals. (SPA)
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Updated 09 March 2025
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Saudi Arabia’s labor market booms as world wakes up to its potential

Saudi Arabia’s labor market booms as world wakes up to its potential
  • Kingdom set to achieve its ambitious Vision 2030 objectives and create a dynamic, diversified workforce

RIYADH: From advanced technology to bustling tourism, Saudi Arabia is witnessing a labor market transformation that is reducing its reliance on oil and creating jobs in construction, green energy, and beyond.

Government initiatives such as the Saudi Nationalization Scheme and Nitaqat initiative have played a pivotal role in shaping the labor market landscape.

These policies have encouraged private sector employers to hire more of the Kingdom’s nationals across various industries, leading to a significant reduction in unemployment rates.

The commitment to enhancing workforce participation has also contributed to a more inclusive job market, while a strategic focus on developing a knowledge-based economy has led to increased investments in education and vocational training programs.

These initiatives are equipping the local workforce with the skills required to thrive in sectors such as advanced manufacturing, healthcare, and financial services, further accelerating employment growth.

Construction boom fuels job creation

The construction and infrastructure sector has experienced exponential growth in recent years, underpinning the Kingdom’s economic expansion, with contract awards in 2024 reaching $146.8 billion, a record high as it overtook 2023’s figure of $118.7 billion, according to Kamco Invest’s GCC Projects Market Update.

The report added that Saudi Arabia accounted for over 53.8 percent of total project awards across the Gulf Cooperation Council in 2024.

Sachin Kerur, managing partner of Middle East at Reed Smith, told Arab News that this boom is leading to a rise in the opportunities for project managers, designers, architects and many other construction professionals.

“Anyone studying Vision 2030 or visiting the important cities of the Kingdom will be very aware of the construction of large-scale housing, rail and road networks, new airports, infrastructure for major sporting events and industrial production plants,” Kerur said. Tourism-related construction has also seen a surge, with new hotels and resorts hiring more Saudi nationals. “Anyone visiting the Kingdom’s hotels of late will have noticed the number of Saudi nationals employed,” Kerur added.

Major projects such as the Rua Al-Madinah and Qiddiya are further fueling demand for skilled labor in the sector. 




The Kingdom’s push to attract foreign investment has not only created job opportunities but also fostered knowledge transfer and skill development among the local workforce. (Shutterstock)

Tourism as a booster

The tourism sector continues to play a pivotal role in shaping Saudi Arabia’s labor market, and is only set to grow as the Kingdom pushes ahead with its aim to attract 150 million visitors annually by 2030. As a result, the demand for hospitality, transportation, and cultural service jobs is rapidly increasing.

“With millions of visitors anticipated to visit Saudi each year, tourism has one of the fastest growing and elastic demand for employment,” Kerur said.

From religious tourism initiatives in Makkah and Madinah to entertainment-driven projects such as the Red Sea Project, the sector’s expansion is creating thousands of jobs for Saudis.

Technology and green energy sectors see expansion

On a tech front, Saudi Arabia’s technology sector is experiencing unprecedented growth, driven by the government’s investments and incentives for global tech firms.

“Foreign investments are driving significant job creation in Saudi Arabia’s emerging industries, particularly technology and innovation, aligning with Vision 2030’s goals of economic diversification and private sector growth,” said Faisal Al-Sarraj, Saudi Arabia’s deputy country senior partner at PwC Middle East.

He continued: “PIF’s focus on technology and innovation has bolstered local employment, particularly in AI, digital transformation, and data analytics. Its support for startups and partnerships with global tech firms is strengthening local expertise.” 

Initiatives such as the $100 billion AI and data analytics initiative, known as Project Transcendence, as well as smart city projects including NEOM, are fostering high-skilled employment in advanced fields. 

Foreign investments are driving significant job creation in Saudi Arabia’s emerging industries.

Faisal Al-Sarraj, Saudi Arabia’s deputy country senior partner at PwC Middle East.

Citing media outlets Bloomberg and CIO, Al-Sarraj said: “This $100 billion plan positions Saudi Arabia as a global AI and data analytics hub, creating thousands of high-skilled jobs and rivaling regional tech leaders.”

The green energy sector is also taking off in Saudi Arabia, bringing a fresh wave of job opportunities and supporting the Kingdom’s sustainability goals.

Solar and wind farms are being developed across the country, creating thousands of new roles and giving locals the chance to dive into the world of clean energy.

Kerur also cited the life sciences and food industries as other sectors that have seen employment growth.

Saudi welcoming the world

The government’s Saudization initiatives, particularly the Nitaqat program which was established in June 2011, have played a crucial role in increasing the number of nationals in the private sector.

“Many commentators regard Saudization as having been most successful in the retail and tourism and hospitality sectors,” Kerur said.

He continued: “Perhaps less success has been achieved in areas such as life sciences, medicine and design and construction where more skilled resources are needed.  That is certainly an area of development for the next few years.”

Moreover, the drive for greater workforce inclusion is also reflected in the increasing focus on supporting female participation in the labor market.

As more opportunities arise in flexible and remote work arrangements, women are stepping into roles across diverse sectors, contributing to the Kingdom’s broader economic transformation goals.

Figures released by the General Authority for Statistics showed that by the end of the third quarter of 2024 the labor force participation rate of Saudi females reached 36.2 percent — well above the original Vision 2030 target of 30 percent, with that goal now upped to 40 percent by the end of the decade. 

Kerur added: “Saudi Arabia’s labor market reforms and initiatives are successfully reducing unemployment levels and so much credit must go to Vision 2030 as economic diversification develops at pace. However, this is not merely labour economics.”

He went on to say: “As with other GCC countries like the UAE, there are social and cultural norms that have to be assessed to ensure they are maintained whilst at the same time ensuring unemployment is minimised and the national workforce is equipped for the challenges of the next three decades.”

Regional Headquarters Initiative and FDI

One of the biggest wins for Saudi Arabia in 2024 was the success of its regional headquarters initiative, which has drawn in over 540 multinational companies to set up shop in the Kingdom.

This surge in corporate presence is not just about numbers — it is about turning Saudi Arabia into a thriving business hub, buzzing with new ideas and opportunities.

Companies such as Amazon, Google, PwC, and Deloitte have relocated their regional headquarters, leading to job creation in professional services, consulting, and administrative roles. 

“This achievement is having an employment impetus as more and more companies are employing Saudi nationals in line with the Kingdom’s status as a developing business hub,” Kerur said.

The Kingdom’s push to attract foreign investment has not only created job opportunities but also fostered knowledge transfer and skill development among the local workforce.

With multinational firms bringing global best practices and expertise, Saudi nationals are gaining invaluable exposure to international business operations, positioning them competitively in the job market.

Another key initiative was the Golden Visa, which allows foreign nationals to live, work, and own property in the Kingdom without a sponsor,

In order to qualify, applicants must meet specific criteria such as significant investments in real estate or business ventures.

Al-Sarraj said the visa “incentivized” highly skilled professionals and entrepreneurs to relocate to Saudi Arabia, and has expanded employment in sectors such as healthcare, education, and technology, and fostered a knowledge-based economy.

He added: “Reforms like the Labor Reform Initiative improved mobility and flexibility for expatriates, making Saudi Arabia a more attractive job market. This policy also encouraged Saudization, driving the hiring of skilled nationals.”

Challenges and the road ahead

Despite the progress, challenges remain in bridging skill gaps and positioning manual labor or skilled trades as a viable career path for Saudis.

“Education and training will be vital all round for the labor market. Indeed more labor capacity is required to implement Vision 2030 projects and this provides Saudi nationals a significant opportunity to develop blue collar skills,” Kerur said.

He continued: “Of course the private sector, both national and international, will have a key role to play to train, develop and employ nationals. The issue will be the stick or the carrot.”

Kerur further explained that the private sector in Saudi Arabia will require support and assistance, particularly in areas where their capacity to operate or expand is currently limited, and where significant financial investment is needed.

“Saudi Arabia has shown a willingness to enable public private partnership in their labor market and more will be expected in this regard,” he said.

According to Al-Sarraj, one of the key issues is that many workers may not have received the necessary training and or hold the qualifications required by employers.

“Despite significant progress, challenges remain, including skill gaps among the workforce, the need for enhanced educational and vocational training programs, and ensuring sustainable employment opportunities for the growing local population,” he said.

Al-Sarraj added: “Employers often cite skill gaps and higher wage expectations as reasons for not hiring Saudis, highlighting the need for enhanced educational and vocational training programs.”

As Saudi Arabia’s labor market continues to evolve, the combined impact of strategic government initiatives, foreign investment, and workforce development efforts will be key to sustaining momentum.

With significant achievements in 2023 paving the way, the Kingdom is well-positioned to achieve its ambitious Vision 2030 objectives and create a dynamic, diversified workforce that meets future economic demands.


Saudi Aramco raises June oil prices for Asian markets

Saudi Aramco raises June oil prices for Asian markets
Updated 11 sec ago
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Saudi Aramco raises June oil prices for Asian markets

Saudi Aramco raises June oil prices for Asian markets

RIYADH: Saudi Aramco has increased its official selling price for crude oil destined for Asia in June, ending a two-month streak of price cuts, the company confirmed in an official statement on Sunday.

The state-owned oil giant raised the price of its benchmark Arab Light crude by $0.20, setting it at $1.40 per barrel above the average of Oman and Dubai crude prices.

The adjustment comes despite persistent downward pressure on global oil markets due to concerns over rising supply and a fragile demand outlook.

The move follows Saturday’s announcement from the OPEC+ alliance, which agreed to boost oil production for a second consecutive month. The group, which includes both OPEC members and key allies like Russia, plans to increase output by 411,000 barrels per day in June.

Market observers are now closely watching the outcome of the next OPEC+ meeting, scheduled for May 5, which will further clarify the group’s production strategy heading into summer.

Saudi Aramco prices its crude oil across five density-based grades: Super Light (greater than 40), Arab Extra Light (36-40), Arab Light (32-36), Arab Medium (29-32), and Arab Heavy (below 29).

The company’s monthly pricing decisions impact the cost of around 9 million barrels per day of crude exported to Asia and serve as a pricing benchmark for other major regional producers, including Iran, Kuwait, and Iraq.

In the North American market, Aramco set the May OSP for Arab Light at $3.40 per barrel above the Argus Sour Crude Index.

Aramco determines its OSPs based on market feedback from refiners and an evaluation of crude oil value changes over the past month, taking into account yields and product prices.


UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global
Updated 05 May 2025
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UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

UAE, Kuwait, and Qatar sustain non-oil growth in April: S&P Global

RIYADH: The non-oil private sectors of the UAE, Kuwait, and Qatar continued their expansion in April, supported by strong demand, improving output, and stable employment conditions, according to the latest Purchasing Managers’ Index surveys released by S&P Global.

In the UAE, the headline PMI held steady at 54 for a second consecutive month, reflecting continued momentum in the country’s non-oil economy. While output growth eased to a seven-month low, firms ramped up hiring at the fastest rate in nearly a year to manage capacity pressures. New orders surged, underpinned by the strongest international demand in five months.

This robust performance aligns with a wider regional trend of economic diversification, as Gulf nations—including Saudi Arabia—work to reduce their long-standing reliance on oil revenues.

“The April PMI results signaled a notable uptick in hiring activity across the non-oil private sector,” said David Owen, senior economist at S&P Global Market Intelligence.

“After several months of mild increases in payroll numbers, despite robust sales growth, job creation rose to its highest level in 11 months.”

Owen noted that the hiring push was largely aimed at easing backlogs, which, while still rising, did so at the slowest pace in six months. “That said, employment growth was still modest overall, adding to suggestions that some firms may be struggling to recruit,” he added.

Any PMI reading above 50 indicates expansion in the non-oil private sector, while a figure below 50 denotes contraction.

Business confidence in the UAE climbed to its highest level so far in 2025, as firms cited strong demand pipelines and positive expectations. Input purchases rose again in April, though at a slower pace than March, which had marked a 68-month high.

“Firms are hopeful that elevated demand levels and strong pipelines, as characterized by steeply rising backlogs, should propel activity higher in the coming months,” Owen said.

Despite increased purchasing and faster supplier delivery times, stock levels remained largely unchanged for the second consecutive month. Business optimism also rose for the third straight month in April.

In Dubai, operating conditions in the non-oil private sector improved at a slower pace due to weaker growth in new business inflows. Nonetheless, order books continued to expand sharply, driving strong overall business activity. Employment rebounded in April after a brief dip in March, as companies aimed to boost capacity. However, firms in Dubai expressed subdued confidence about future activity, with sentiment among the lowest on record.

Kuwait sees strongest output

Kuwait's non-oil private sector saw significant gains in April, with the country’s PMI rising to 54.2 from 52.3 in March—marking one of the sharpest expansions on record since the survey began in 2018.

“It was a bumper start to the second quarter of 2025 for non-oil companies in Kuwait, with a further influx of new orders leading companies to expand output at one of the sharpest rates since the survey began,” said Andrew Harker, economics director at S&P Global Market Intelligence.

The expansion was driven by robust new order growth, supported by competitive pricing and strategic marketing efforts. However, firms faced rising input costs that made it harder to maintain price stability.

While employment rose only marginally, the minimal hiring contributed to a further buildup in outstanding work.

“It remains to be seen, however, whether firms will be able to keep restricting selling prices in a scenario where input costs are rising sharply,” Harker noted. “The coming months will illustrate the extent to which companies are happy to see margins come under pressure in order to keep orders flowing in.”

Kuwaiti firms also reported a notable increase in export orders. Optimism about future output remained high, supported by competitive strategies, product development, and marketing.

Qatar growth slows slightly

Qatar’s non-oil sector saw a slight dip in overall momentum in April, with its PMI falling to 50.7 from 52 in March. Despite the decline, the index stayed above the neutral 50 mark for the 16th consecutive month, reflecting continued—if slower—growth.

Output among Qatari non-energy firms rose for the first time in 2025, but the sector faced a drop in new business and a cooling labor market.

“The PMI indicated continuing growth of the non-energy private sector economy at the start of the second quarter, but there was a loss of momentum owing mainly to a renewed reduction in new business and slower employment growth,” said Trevor Balchin, economics director at S&P Global Market Intelligence.

“The latest figure of 50.7 was the lowest in three months and below the long-run trend level of 52.3, as weaker demand offset an increase in total output.”

Growth was led by the manufacturing, services, and wholesale and retail sectors, while construction activity remained weak despite signs of stabilization.

Job creation remained positive across sectors, although April saw the slowest employment growth since August 2024.

“The employment component remained elevated in April, indicating further strong jobs growth. That said, there was evidence that the recent labor market boom was easing, with the rate of job creation down at an eight-month low,” Balchin said.

Wage growth also slowed to a five-month low but remained among the strongest since the survey’s inception in 2017.

Looking ahead, Qatari businesses maintained optimism for the year ahead, citing growth in real estate, infrastructure development, tourism, and a rising expatriate population as key drivers.


Saudi bank lending hits $827bn in March, fastest growth in over 3.5 years

Saudi bank lending hits $827bn in March, fastest growth in over 3.5 years
Updated 05 May 2025
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Saudi bank lending hits $827bn in March, fastest growth in over 3.5 years

Saudi bank lending hits $827bn in March, fastest growth in over 3.5 years

RIYADH: Saudi Arabia’s banking sector continued its robust lending expansion in March, with total credit reaching SR3.1 trillion ($827.2 billion), marking a 16.26 percent year-on-year increase. 

According to data from the Saudi Central Bank, also known as SAMA, this represents the highest annual rise in three years and eight months. 

The surge was primarily fueled by corporate lending, which rose from 52.46 percent of total bank credit in March 2024 to 55.19 percent this year. Credit extended to businesses grew by 22.3 percent over this period to exceed SR1.71 trillion. 

This shift underscores how businesses are now the dominant force shaping Saudi Arabia’s lending landscape, signaling the economy’s accelerating diversification.     

Real estate activities continued to lead within the corporate loan mix, comprising 22 percent of business lending and growing by an impressive 40.5 percent year-on-year to reach SR374.5 billion. 

The sector’s continued expansion reflects heightened demand for housing, commercial infrastructure, and new development projects across the Kingdom’s mega-cities and giga-projects under Vision 2030. 

Other key sectors included wholesale and retail trade, which held a 12.43 percent share with SR212.8 billion in lending. Manufacturing accounted for 11.05 percent, with SR189.18 billion in loans. The electricity, gas, and water supply sector comprised 10.6 percent, with loans totaling SR181.43 billion. 

Each of these areas benefited from increased public and private sector spending and reforms targeting industrial growth and economic resilience. 

Notably, education — while accounting for just 0.55 percent of corporate loans — posted the highest growth rate across all sectors at 44.7 percent, reaching SR9.35 billion. This surge aligns with the Kingdom’s efforts to expand educational access and upgrade academic infrastructure in line with long-term human capital goals. 

Financial and insurance activities also showed strong momentum, expanding 38.41 percent to hit SR161.23 billion, ranking third in growth after real estate and education. The rise reflects increased demand for financial services, greater insurance penetration, and fintech integration across key economic sectors. 

Meanwhile, retail lending stood at SR1.39 trillion in March, growing 9.6 percent year on year. However, its share of total credit declined from 47.54 percent in March 2024 to 44.81 percent this year, reflecting a gradual shift in the banking sector’s focus from consumer finance to business-driven growth. 

This moderation in retail lending share comes despite strong performance in personal loans, auto finance, and housing credit, indicating that corporate and commercial financing now command greater attention from lenders responding to market trends and government priorities.   

Improved lending quality 

According to an April 2025 report by McKinsey & Company, the quality of lending in Saudi Arabia has improved across nearly all major sectors. Based on their analysis of expected credit loss versus lending volume from 2020 to 2023, sectors such as services, finance and insurance, and utilities have shown both increased lending and lower credit risk. 

A key finding in McKinsey’s data is that financial institutions in Saudi Arabia are increasingly diversifying their portfolios toward sectors with lower ECL growth and higher lending volumes. For example, the services and financial sectors have exhibited strong improvements in lending quality, while construction and agriculture continue to show relatively higher risk levels.  

A bubble chart in the report maps lending volume against changes in ECL, revealing that the Saudi banking sector is pivoting toward sectors with improving credit profiles. 

Sectors like manufacturing, trade, electricity, and utilities now dominate lending — not only in volume but also due to their lower risk outlooks. This trend aligns with national efforts to prioritize economic diversification and reduce overexposure to volatile or high-risk sectors. 

In the Gulf Cooperation Council, construction and trade sectors are growing steadily — according to McKinsey — at 5 to 8 percent annually, while real estate is expanding around 8 percent, supported by projects across Saudi Arabia and Qatar. Manufacturing is also gaining traction, bolstered by targeted industrial strategies. 

Meanwhile, emerging industries such as education, finance, and food services are collectively growing at rates of 20 percent or more annually.   

Capital market innovation 

McKinsey also noted that Saudi banks are transitioning from a traditional “originate-to-hold” model to a more agile “originate-to-distribute,” or OTD, model. This shift enables banks to issue loans and then offload risk through tools like loan trading, securitization, and syndicated deals, freeing up capital for further lending. 

In a milestone for Saudi financial markets, 2025 saw the signing of the Kingdom’s first residential mortgage-backed securities. Legal frameworks are being developed to enable more such instruments, providing capital-light financing options and paving the way for a more liquid corporate bond market.   

McKinsey projects that OTD volumes in Saudi Arabia could nearly double by 2030, improving banks’ return on assets and equity through faster lending cycles and increased fee income. This is expected to enhance financial sector efficiency while supporting large-scale projects through innovative funding channels.  

ESG and digital transformation 

The report also highlighted the growing role of environmental, social, and governance standards in shaping Saudi lending. With national sustainability agendas in place, many banks are embedding ESG principles into their credit frameworks, including the issuance of green bonds and sustainability-linked loans. 

At the same time, operational efficiency is improving. Front-office productivity is rising as banks invest in AI-driven analytics, advanced risk modeling, and automation. This not only increases competitiveness but also enables faster, more accurate credit decisions in a dynamic market. 

The combined effect is a more resilient, innovative, and inclusive lending landscape — one that supports diversified economic growth while safeguarding financial stability. 

With credit demand projected to grow by 12 to 14 percent annually through the end of the decade, Saudi banks are expected to maintain strong momentum. 

Still, McKinsey emphasizes that sustained growth will require banks to boost productivity and embrace operational innovation.  

Some banks have already shown improvement, but the corporate and investment banking sector still has room to optimize client service and internal efficiency. 

Currently, front-office productivity varies widely among GCC banks. Coverage teams in lagging institutions spend just 20 percent of their time on client-facing activities, compared to 30 percent among industry leaders. McKinsey projects that future top performers will raise that figure to 40 percent by 2030 — a shift that will require significant investment in AI and internal digitization. 

GCC banks are also closing the gap with global peers in analytics and automation. As these capabilities scale, AI-powered operations are expected to drive faster risk modeling, more responsive lending, and greater agility.  

As the region’s markets mature and international competition intensifies, CIB institutions must evolve to offer more sophisticated solutions — such as capital-light lending, securitization, and structured finance. 

Banks that adapt and build long-term investor relationships will be best positioned to shape the market and capture the most promising opportunities.  


Saudi Arabia’s non-oil sector growth continues in April as PMI hits 55.6 

Saudi Arabia’s non-oil sector growth continues in April as PMI hits 55.6 
Updated 05 May 2025
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Saudi Arabia’s non-oil sector growth continues in April as PMI hits 55.6 

Saudi Arabia’s non-oil sector growth continues in April as PMI hits 55.6 

RIYADH: Saudi Arabia’s non-oil private sector continued to expand in April, with the Riyad Bank Purchasing Managers’ Index reaching 55.6, indicating sustained growth in business activity, a new survey showed.  

According to the latest Riyad Bank Saudi Arabia PMI report compiled by S&P Global, the April reading marked a slight drop from 58.1 in March but remained comfortably above the neutral 50.0 mark that separates expansion from contraction. 

Despite the marginal decline, Saudi Arabia’s PMI for April was still higher than the UAE’s reading of 54.0 and Kuwait’s 54.2. 

Naif Al-Ghaith, chief economist at S&P Global Market Intelligence, said: “As of April 2025, Saudi Arabia’s non-oil economy continues to assert itself as a pivotal component of the nation’s economic landscape.”  

He added: “The diversification efforts have continued to bear fruit, underscoring the Kingdom’s strategic shift away from oil dependency toward a more balanced and sustainable economic framework.”  

The PMI survey signalled a strong increase in employment levels across the non-oil private sector in April. 

The rate of hiring growth accelerated to its joint-fastest pace in ten and a half years, matching the level recorded in October 2023, as companies expanded their staffing capacity in response to rising sales and increased activity. 

As a result, staff cost inflation surged to a record high in April, reversing the slowdown in cost pressures seen in March. 

“Employment in the non-oil private sector has been particularly vibrant. This surge in employment is a response to rising sales and increased business activity, prompting firms to expand staffing capacities,” said Al-Ghaith.  

The report added that business activity at Saudi Arabia’s non-oil companies increased sharply at the start of the second quarter, with firms commonly reporting an expansion in output due to higher sales, new project approvals, and strong tourist numbers. 

“While output growth remains robust, it is somewhat tempered by global economic uncertainties and competitive pressures affecting client spending. Nonetheless, employment figures continue to climb, indicating a sustained growth trend since last May,” added Al-Ghaith.  

He further noted that Saudi Arabia had successfully managed inflation compared to other nations, highlighting the Kingdom’s effective control of domestic prices amid global uncertainties. 

The latest PMI data also signalled a steep increase in purchasing activity, with the growth rate reaching a three-month high. 

S&P Global noted that expectations among non-oil firms for output in one year’s time increased slightly from March, although overall business optimism remained below the long-run survey average. 

Looking ahead, Al-Ghaith said the Kingdom’s fiscal prospects remain positive for 2025. 

“Forecasts suggest a 3 percent expansion in overall gross domestic product and a 4.5 percent increase in non-oil sectors, continuing the upward trajectory in non-oil activities,” said Al-Ghaith.  

He added: “This growth is crucial for sustaining the economic transformation outlined in Vision 2030, which aims to foster diverse, innovative industries.” 


Oil Updates — crude tumbles as OPEC+ accelerates output hikes, surplus looms

Oil Updates — crude tumbles as OPEC+ accelerates output hikes, surplus looms
Updated 05 May 2025
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Oil Updates — crude tumbles as OPEC+ accelerates output hikes, surplus looms

Oil Updates — crude tumbles as OPEC+ accelerates output hikes, surplus looms

SINGAPORE: Oil prices fell more than $1 a barrel on Monday as OPEC+ is set to further speed up oil output hikes, spurring concerns about more supply coming into a market clouded by an uncertain demand outlook, according to Reuters.

Brent crude futures dropped $1.34, or 2.19 percent, to $59.95 a barrel by 10:17 a.m. Saudi time while US West Texas Intermediate crude was at $56.87 a barrel, down $1.42, or 2.44 percent.

Both contracts touched their lowest since April 9 at Monday’s open after OPEC+ agreed to accelerate oil production hikes for a second consecutive month, raising output in June by 411,000 barrels per day.

The June increase from the eight producers in the OPEC+ group will take the total combined hikes for April, May and June to 960,000 bpd, representing a 44 percent unwinding of the 2.2 million bpd of various cuts agreed on since 2022, according to Reuters calculations.

“The May 3 OPEC+ decision to raise production quotas another 411,000 bpd for June adds to the market expectation that the global supply/demand balance is moving to a surplus,” Tim Evans, founder of Evans on Energy said in a note.

The premium between the front-month Brent contract and that for delivery in six months was 4 cents a barrel, narrowing from 47 cents in the previous session.

However, the spread flipped to a discount, known as a contango structure, of 11 cents a barrel earlier on Monday, for the first time since December 2023, reflecting expectations that the later-dated market is amply supplied or demand may drop.

Barclays and ING have also lowered their Brent crude forecasts following the OPEC+ decision.

Barclays reduced its Brent forecast by $4 to $66 a barrel for 2025 and by $2 to $60 for 2026, while ING expects Brent to average $65 this year, down from $70 previously.

“We now expect OPEC+ to phase out the additional voluntary adjustments by October 2025 but also expect slightly slower US oil output growth,” Barclays analyst Amarpreet Singh said in a note.

The net impact of the higher OPEC+ output and lower US output has increased Barclays’ estimate of supply in 2025 by 290,000 bpd for 2025 and 110,000 bpd for 2026, he said.

ING analysts led by Warren Patterson said the global oil balance is expected to move deeper into surplus throughout 2025.

“The oil market has been dealing with significant demand uncertainty amid tariff risks. This change in OPEC+ policy adds to uncertainty on the supply side,” they added.