Oil drives both the fall and the rebound in Saudi industrial production

Saudi’s Industrial Production Index fell 10.9% y-o-y in September — less than half the 23.5% decline in August, as crude production restarted, Gastat data (pdf) shows. Month-to-month, the index jumped 15.6% as crude output recovered from a trough, while non-oil activities remained essentially flat.

The annual decline is concentrated in oil. Oil activities were down 15.5% y-o-y and mining and quarrying 16%, the two drags on the headline, while non-oil activities were essentially flat at plus 0.1%. The base held up elsewhere: electricity and gas rose 6.4% y-o-y and water and waste management 7.3%.

The monthly bounce is the recovery starting. The index rose 15.6% from August, led by oil up 24.7% and mining up 29.9%, as crude production ramped back after a sharp cut caused by attacks on energy facilities and disruption to shipping, Oxford Economics lead economist Akanksha Samdani tells EnterpriseAM; production has since recovered and should lift output toward year-end.

REMEMBER- Saudi crude exports recovered in September, with shipments reaching around 5.4 mn bbl / d, up from 2.45 mn bbl / d in August.

Manufacturing is turning, slowly. The sub-index fell 5.4% y-o-y but gained 2.8% on the month, and here too the drag is oil-linked: coke and refined petroleum products were down 13.6% y-o-y and chemicals 3.8%, while basic metals and beverages grew. Samdani expects limited near-term lift, since most of the manufacturing fall came from oil refining. “As refineries restart, manufacturing output will improve, but this is a return to normal rather than new growth,” she says.

The recovery has a ceiling for now. Samdani expects industrial production to run about 15% below its 2025 level this year. “The risk of further attacks means output is likely to stay below last year’s levels for some time, with a return to growth from the second half of 2027 and a stronger rebound in 2028,” she adds.

What to watch: Non-oil manufacturers still face a hard environment. “Shipping disruption and higher transport and ins. costs make it harder to sell goods abroad, and export orders have fallen for eight months in a row,” Samdani says. Rising input costs and a higher minimum wage for Saudi workers from April 2027 add to the squeeze, and slower construction is denting demand for building materials. Heavier local sourcing and firm domestic demand are the offsets.