The aim of this paper is twofold. First, we investigate whether oil market volatility affects fund performance. Second, we examine whether oil volatility impacts fund managers' ability to select stocks and to time oil volatility. Our analysis is based on the Saudi Arabian market, a major developing economy and the world's largest oil producer. Our first main finding is that oil market volatility has a significant negative impact on mutual fund performance. Notably, this result holds robustly across all the volatility and performance measures applied in our analysis. Secondly, the risk-adjusted performance evidence suggests that high oil volatility reduces managers' stock selection ability. Further empirical analysis is consistent with the notion that skilled mutual funds are able to consistently generate alpha but evidence is mixed on whether they can improve performance by timing oil market volatility. Our study presents new evidence on a fast-growing emerging market and identifies important practical implications for the mutual fund industry which help investors, academics and regulators to better understand the functioning of this market.