Aramco’s swelling profits could bolster Saudi budget

• Aramco provides half of the Saudi budget
• Higher prices offset lower export volume
• Spending may keep deficit large

The Saudi budget stands to benefit from an increase in oil revenues, economists say, following bullish statements by state-owned oil company Saudi Aramco.

The company reported its highest quarterly profits in three years for the first quarter of the year and says it expects second-quarter earnings to be even higher. While disruptions to shipping in the Strait of Hormuz have curtailed Aramco export volumes, the company is benefiting from oil prices that at their peak were almost double their levels in February.

It is good news for the Saudi finance ministry, which relies on Aramco oil for more than half of the state’s income. The country’s budget deficit ballooned to its highest level since Covid last year, amid outlays on big state-backed projects.

Increased oil revenues help Saudi Arabia to plug the hole in its finances, although economists warn that costs associated with the war could put more pressure on the budget.

“Higher oil prices should lift revenues in Q2,” Daniel Richards, Mena economist at Emirates NBD, the UAE bank, wrote in an email. “But continued fiscal expansion – via Vision 2030 outlays and conflict-related spending – could keep the deficit elevated.”

Aramco reported $32 billion in net profits in the first quarter, a 73 percent increase from the last three months of 2025.

In an earnings call on Monday, president and CEO Amin Nasser said he expected refining margins to remain elevated throughout the year and that the company is looking to increase its current maximum export volumes, without offering further details.

Nasser said the company expects oil prices to remain elevated into 2027, if disruptions in the strait continue, and for Aramco to increase its profits in the second quarter.

Aramco will also experence a surge in business when the Strait of Hormuz reopens, he said.

“We think we will see significant demand when the straits open up,” Nasser said, “not just because of demand growth but also from the need to refill inventories.”

Aramco has been less affected by the closure of the strait compared with other regional oil companies because of the East-West Pipeline, which allows it to divert up to 7 million barrels per day to the Red Sea coast, of which up to 5 million bpd are exported.

“They’re benefiting from the price and the ability to export,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank, who expects to see this reflected in the budget.

“I think in the second quarter, revenue will be much higher,” she said, “because you’ll have sustained higher prices for April, May and likely June.”

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Higher oil revenues have yet to appear in the finance ministry’s budget updates. The ministry’s report for the first quarter showed a 3 percent fall in oil revenues compared with the first three months of 2025.

A lag in payments from Aramco may account for why oil revenues were not higher in the first-quarter figures, said Tim Callen, fellow at the Arab Gulf States Institute in Washington and a former IMF mission chief to Saudi Arabia.

“If there are higher oil revenues in the second half of March, that’s yet to have filtered in,” he said.

The first quarter also showed a 20 percent increase in spending, largely as a result of costs associated with the war, including military outlays. It pushed the quarterly deficit up to SAR126 billion, the highest on record.

The hike in spending is now the major risk factor in estimating the budget deficit, according to Malik. The expectation of higher oil revenues means that ADCB has trimmed its deficit projections for 2026 from 5.3 percent of GDP to 4.2 percent.

This projection depends on the state’s ability to manage spending increases, Malik said: “Much will depend on expenditures.”