Saudi Arabia's oil sector sees 3.8% growth in Q2, contributing to economic expansion

Saudi Arabia on July 31 reported an estimated 3.9% of real GDP growth for Q2 year over year, with oil activities growing by 3.8% in a period marked by significant OPEC+ quota rebounds and heightened geopolitical tensions.

It marked the kingdom's fifth straight quarter of economic growth and a return to expansion in its oil sector, after it had contracted 0.5% year over year in Q1, the Saudi General Authority for Statistics reported.

The GDP figures are closely tracked by oil market watchers as a sign of health for the world's largest crude exporter and de facto OPEC leader, though its efforts to diversify its economy away from its reliance on oil revenues have made it somewhat more immune to the gyrations of prices in recent years.

Still, oil has a massive impact on Saudi finances, and the second quarter yielded great opportunity for the kingdom, as OPEC+ began unwinding voluntary production cuts in April.

Leading the output increase, Saudi Arabia's crude production soared from 8.95 million b/d in March to 9.54 million b/d in June, according to the latest Platts OPEC+ Survey from S&P Global Energy.

The kingdom's crude exports remained strong in Q2, standing at 5.848 million b/d in April, 5.684 million b/d in May and 6.182 million b/d in June, according to data from S&P Global Commodities at Sea.

Platts assessed the Dubai benchmark, a key marker of Middle East sour crudes, at an average of $66.89/b for the quarter. That is well below the fiscal breakeven oil price of nearly $91/b that Saudi Arabia needs to balance its budget, according to the International Monetary Fund.

The shortfall means that Saudi Arabia will need to continue tapping into debt or drawing on its foreign reserves to maintain spending levels.

As for the non-oil segment of the economy, Saudi Arabia's non-oil GDP, boosted by the tourism sector, grew by 4.7% over the second quarter, a downwards pace compared to Q1's growth of 4.9%, yet the highest contributor to the quarter's GDP expansion, according to the government figures.

In April, the IMF estimated a 2.9% expansion to Saudi Arabia's GDP for 2025 and revised its projection on July 31 to 3.6% for the year. This improved outlook for the year is due to better financial conditions, but significant downside risks remain as the Aug. 1 deadline on additional US tariffs approaches and as geopolitical tensions rise, the IMF said.