Saudi Arabia's oil strategy lowers prices, giving Trump a boost: WSJ

Saudi Arabia has increased oil output, pushing crude prices lower this year in a move that analysts say serves multiple goals: reclaiming market share from Brazil, Guyana and U.S. shale, enforcing OPEC discipline and raising cash for costly domestic projects, The Wall Street Journal reported Friday.

The shift has also been a political windfall for President Trump. Cheaper Saudi crude has helped pull down U.S. gasoline prices (now averaging $3.16 a gallon, according to AAA) and eased the impact of tariffs on inflation.

Trump has repeatedly demanded lower fuel costs and argued that falling prices put added pressure on Russia amid the Ukraine war. A White House spokeswoman said the president is “making the U.S. the powerhouse of oil and gas production once again,” ensuring affordable energy for consumers.

Riyadh’s oil diplomacy marks a departure from its strained relationship with the Biden administration, when the kingdom resisted U.S. appeals to increase supply in 2022. Today, OPEC+ controls roughly 40% of global output, and Saudi Arabia remains its dominant player.

“Delivering more barrels offers a double win for the Saudis -- scoring points with Trump and recapturing some market share lost to U.S. exporters,” Clayton Seigle of the Center for Strategic and International Studies told the Journal.

But the strategy carries risks. Brent crude (CO1:COM)  recently traded around $65 a barrel, well below the $92 level the IMF estimates Saudi Arabia needs to balance its budget. Analysts warn sustained low prices could squeeze U.S. shale producers while also straining the kingdom’s finances, which remain heavily reliant on oil despite diversification efforts.

Saudi Arabia has turned to asset sales and rising debt (public borrowing is expected to reach nearly one-third of GDP this year) to sustain its spending. For now, however, its decision to pump more oil is reshaping markets, bolstering ties with Trump and intensifying competition across the energy sector.

Dear Readers: We recognize that politics often intersect with the financial news of the day, so we invite you to click here to join the separate political discussion.