Investing.com -- Barclays has begun coverage on Saudi Aramco (TADAWUL: 2222 ) with an Overweight rating and a price target of SAR 31, noting that the oil behemoth’s recent underperformance may be an opportunity for investors.

Over the past year, Aramco’s shares have dropped about 13%, trailing the Saudi Tadawul index by approximately 7%. Barclays views this lag as a chance to enter at an attractive valuation.

“Institutional investor interest in the energy sector is currently close to all-time lows, with concerns over the potential for a fall in oil prices coming alongside continued uncertainty about the long-run outlook for fossil fuel demand,” analysts led by Lydia Rainforth said in a note.

“Aramco, as the world’s largest oil and gas company, has not escaped this … with the uncertain macro outlook compounded by a reduction in 2025E free cash flow (FCF) given a step-up in capex to facilitate future growth.”

The analysts said they see the broader market bearishness across energy as “overdone.”

Barclays forecasts a greater than 30% rise in total production by 2030 compared to 2024 levels. This increase, combined with a tapering of capital expenditure from current peak levels of $52-58 billion annually, is expected to drive material growth in cash flow.

“The combination of these factors should lead to an increase in FCF, potentially to more than $120bn by 2030E vs. c$75bn in 2025E,” the analysts noted.

They outline five key drivers behind its positive outlook: a significant ramp-up in crude oil output, expected to add close to 2 million barrels per day, expansion in natural gas production that also enables more oil to be exported, growth in associated liquids that are not subject to OPEC limits, improved performance in downstream operations, and a gradual reduction in capital spending starting from 2027.

The analysts highlight that Aramco’s downstream segment alone could contribute $8-10 billion annually to operating cash flow by 2030, based on the company’s own guidance.

Despite near-term pressures, Barclays believes that oil demand will continue to grow into the 2030s. As non-OPEC supply growth moderates, fears of a sharp fall in oil prices may prove exaggerated.

With Aramco maintaining one of the lowest production cost bases globally, Barclays considers it well-positioned to capture value in a recovering energy market.