Saudi oil revenue under combinations of realised price and crude volume, from the Q2 2026 baseline to 2027
ABSTRACT
In the second quarter of 2026 Saudi budget oil revenue rose 22% year on year while oil activities contracted 24.8%. This simulation treats oil revenue as the product of realised price and volume and maps three conditional branches from that baseline: August volume at second-quarter prices, July volume at August prices, and a Hormuz reopening at the EIA’s 2027 price. All parameters come from the Ministry of Finance, GASTAT, Aramco, the IEA, Argus, the World Bank and Fitch; no probabilities are assigned. The arithmetic shows that recovering volume at a lower price restores more revenue than holding a high price at reduced volume, and that Fitch’s $94 breakeven rises to about $142 at August output.
1. Purpose and method
The 2026 war produced two opposite shocks for Saudi Arabia: the oil price rose because the volume Saudi Arabia could export fell. Transit through Hormuz has been restricted since early March 2026, and the Ministry of Finance’s quarterly report of 30 July recorded a 22% annual rise in second-quarter oil revenue, while GASTAT’s revised data of 8 September showed oil activities 24.8% lower (Arab News, 2026a, 2026c). The claim tested here is that, for the Saudi central government budget, exportable volume is the binding variable and price only partly offsets its loss. The method is a two-factor revenue identity. Each branch states a condition, the mechanism, the arithmetic from listed parameters and the indicators that would confirm it. The branches are conditional mappings; no probabilities are assigned and none of the outputs is a forecast. Aramco’s dividend transfer and sukuk issuance are outside the scope except where they affect the timing of revenue.
The fiscal background frames the exercise. Rentier public finance depends on resource sales rather than a tax base, and Sachs and Warner (2001) associate such dependence with slower growth. Moshashai et al. (2020) show that Vision 2030 fiscal reform aimed to reduce the budget’s sensitivity to the oil price. Neither framework addresses a case in which export volume is physically cut, which is the condition this simulation isolates.
2. The published baseline
Aramco’s average realised crude price was $108.1 per barrel in the second quarter of 2026 against $66.7 a year earlier (Saudi Aramco, 2026), an increase of about 62%. Budget oil revenue reached SAR 185.1 billion, up 22%; total revenue was SAR 338.8 billion (+12%), spending SAR 373.1 billion (+11%) and the quarterly deficit SAR 34.3 billion (Asharq Al-Awsat, 2026; Arab News, 2026a). Financing costs rose 41% and subsidies 73% in the same quarter. The first-half deficit was SAR 160 billion, fully financed by borrowing without drawing on reserves (Arab News, 2026a), against a full-year plan of SAR 165 billion approved in January (Noon Post, 2026). Real GDP fell 4.7% year on year in the second quarter (Arab News, 2026c).
Volume deteriorated after the quarter closed. The IEA reports Saudi output falling from 8.24 mb/d in July to 5.97 mb/d in August (International Energy Agency [IEA], 2026a). In July, Fitch put the fiscal breakeven at $94 per barrel on an assumed 2026 average output of 9 mb/d (Enterprise AM, 2026). The East–West pipeline, the main bypass to Yanbu, was hit by drones on 10–11 September, restarted on 22 September at low rates, and full capacity was expected in six to eight weeks (Yap et al., 2026).
3. The identifying assumption set
The simulation rests on five parameters and one identity.
1. Identity: oil revenue relative to Q2 2025 equals (P / 66.7) × (V / V₀), where P is the realised price and V crude output in mb/d.
2. Base revenue: Q2 2025 oil revenue is derived as 185.1 / 1.22 = SAR 151.7 billion.
3. Base volume V₀: the 2025 Saudi output average of 9.48 mb/d (Argus Media, 2026) stands in for Q2 2025 output.
4. Price conversion: realised price is linked to Brent by the Q2 2026 ratio of Aramco’s realised price to the World Bank Brent average for that quarter, 108.1 / 104.4 = 1.035 (World Bank, 2026).
5. Volume anchors: 5.97 mb/d (August), 8.24 mb/d (July) and 9.0 mb/d (Fitch).
Two checks discipline the identity. The price ratio is 108.1 / 66.7 = 1.621, so the revenue rise of 1.22 implies a non-price factor of 1.22 / 1.621 = 0.753, a fall of about 25% that matches GASTAT’s 24.8% contraction in oil activities. Applied to V₀, the implied Q2 2026 volume is 0.753 × 9.48 = 7.14 mb/d. This is a derived value, not a reported one.
4. Branch A: high price, August volume
Condition: the Red Sea route stays impaired and Hormuz restricted, so output remains at the August level, while the realised price holds at the second-quarter level.
Mechanism: price carries the whole revenue defence. Arithmetic: (108.1 / 66.7) × (5.97 / 9.48) = 1.621 × 0.630 = 1.021, giving 1.021 × 151.7 = SAR 154.9 billion per quarter. This is 2% above Q2 2025 and 16% below Q2 2026. If the realised price also falls to the World Bank’s August Brent monthly average of $90.9 (World Bank, 2026), converted to 90.9 × 1.035 = $94.1, the index drops to 1.411 × 0.630 = 0.889 and revenue to SAR 134.8 billion, 27% below Q2 2026.
The breakeven moves with volume. If non-oil revenue and spending are held fixed, the oil revenue Fitch’s breakeven requires is constant, so price must rise in proportion as volume falls: 94 × 9 / 8.24 = $102.7 at July output and 94 × 9 / 5.97 = $141.7 at August output. A price above $94 therefore does not signal fiscal balance under August volume.
Indicators: Saudi output in the IEA’s October report on 14 October (IEA, 2026b); Yanbu tanker loadings; the size of the third-quarter deficit in the next quarterly budget report.
5. Branch B: lower price, July volume
Condition: the East–West pipeline returns to full capacity on the Reuters timetable and output recovers to the July level, while the price eases to the August Brent average.
Mechanism: volume recovery replaces price as the revenue carrier. Arithmetic: (94.1 / 66.7) × (8.24 / 9.48) = 1.411 × 0.869 = 1.226, giving SAR 186.0 billion per quarter, 0.5% above Q2 2026. A price roughly $14 below the second-quarter realised level thus yields second-quarter revenue once output returns to 8.24 mb/d.
Indicators: confirmation of full pipeline capacity in early to mid-November; IEA output data for October; realised prices in Aramco’s third-quarter results.
6. Branch C: Hormuz reopening at a lower price
Condition: Hormuz transit normalises, output reaches the 9 mb/d Fitch assumption, and Brent converges on the EIA’s September forecast of a $74 average for 2027 (U.S. Energy Information Administration [EIA], 2026).
Mechanism: higher volume meets the price fall that its own return produces. Arithmetic: 74 × 1.035 = $76.6 realised; (76.6 / 66.7) × (9.0 / 9.48) = 1.149 × 0.949 = 1.090, giving SAR 165.4 billion per quarter, 11% below Q2 2026 and 9% above Q2 2025.
Branch C produces less revenue than Branch B despite higher output, because the price falls further than volume rises. The fiscal value of reopening lies in lower volatility and restored real output rather than in a revenue gain.
Indicators: tanker transit counts through Hormuz; the EIA’s October outlook on 6 October; the OPEC+ meeting on 4 October.
7. Failure conditions and limitations
The identity assumes that budget oil revenue moves with price times volume within the quarter. In practice it combines Aramco dividends, royalties and taxes with different timing, so the branch values are approximate in level. Crude output differs from exports: part of the East–West flow feeds Red Sea refineries, and product prices are not modelled. The 1.035 conversion holds the realised-to-Brent spread at its second-quarter level. If Q2 2025 output differed from the 2025 average, every index shifts proportionally. The simulation leaves out spending: with financing costs up 41% and subsidies up 73%, an unchanged revenue path is still compatible with a wider deficit. The quarter-to-quarter deficit narrowing from a derived SAR 125.7 billion in the first quarter to SAR 34.3 billion in the second may also reflect spending timing, which the sources do not separate.
8. Outlook: Türkiye, Saudi Arabia and the World
For Saudi Arabia, the 2027 pre-budget statement of 30 September assumes 12.8% real growth and a deficit of 3.6% of GDP after a 3.6% contraction in 2026 (Arab News, 2026b). That growth rate requires output close to Branch C. Fitch’s 2027 deficit estimate of 4.7% of GDP (Enterprise AM, 2026) is compatible with a slower volume recovery. The October OMR on 14 October will be the first official measure of September output after the pipeline outage.
For Türkiye, the branches separate the two countries’ interests less than the price alone suggests. Branch C lowers Türkiye’s import price while restoring Saudi volume, whereas Branch A keeps Türkiye’s bill high while Saudi revenue stays 16% below its second-quarter level. The pace of the 2,000 MW solar project under the $2 billion intergovernmental agreement signed in Riyadh in February 2026 (CNBC-e, 2026) may depend on which branch Saudi borrowing has to finance in 2027.
Globally, the Saudi case shows that a high oil price is not a sufficient measure of producer welfare when the supply loss falls on the producer itself.
9. Conclusion
Across the three branches, volume determines the size of Saudi oil revenue more than price does. Holding the second-quarter price at August output yields SAR 154.9 billion per quarter. Restoring July output at the August Brent level yields SAR 186.0 billion. Reopening Hormuz at the EIA’s 2027 price yields SAR 165.4 billion. At August volume the $94 breakeven becomes about $142. The 2027 budget’s growth assumption is therefore a wager on volume, and the October IEA output data will be the first test of which branch is under way.
SOURCES
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Furkan Mahmut Tameroglu