OPEC+ yesterday approved a fresh increase in production, albeit a limited one of 137,000 barrels per day. And although oil prices rose slightly after the announcement, they still remain in a narrow trading range, with Brent crude hovering just above $65 per barrel.
This development carries a two-edged implication. On one side, it is good news for energy-consuming nations — including the United States. On the other, it is bad news for oil producers — including, paradoxically, the US itself.
The Wall Street Journal reported that Saudi Arabia’s strategy to lead the rollback of production cuts amounts to a “gift to Trump,” because it helps keep gasoline prices down at the pump and mitigates the economic impact of tariffs. Moreover, it cuts into Russian energy export revenues, making it easier for Trump to broker a peace deal in Ukraine, according to the newspaper’s analysis.
In some respects, Saudi Arabia’s shift to increased production is beneficial to the US, particularly in terms of retail fuel pricing. The national average gallon price stood at $3.133 on Sunday (according to AAA), slightly below last year’s $3.176. But that average is a broad indicator — states with higher local taxes, like California, always command higher pump prices regardless of OPEC+ policy.
However, low oil prices also raise anxiety for the US shale industry — a sector that may or may not have been a target in Saudi Arabia’s decision to unwind cuts agreed in 2022. Many media reports suggest OPEC+ is looking to reclaim market share from the US, Guyana, and Brazil.
But the rivalry is not merely about barrels. For instance, US oil exports to China dropped by about 50% last year, even before Trump’s tariff measures intensified. That forced much of US output to redirect toward Europe.
At the same time, Guyana exports oil mainly to Europe, making it a direct competitor to the US — though its output is only about 700,000 barrels per day, far short of competing with Washington or Riyadh. Meanwhile, Brazil has been expanding its oil exports significantly, with a large portion going to China.
Herein lies the real battlefield: China and the broader Asia region, where demand is growing faster than anywhere else. Many analysts expect this growth trajectory to continue long after demand peaks elsewhere. That said, European demand also continues to grow — many European nations still import Russian oil despite announced plans to phase out Moscow’s energy over coming months.
Despite Wall Street Journal’s hypothesis that Saudi Arabia is currying favor with Trump, Riyadh’s behavior since the Biden administration struggled to maintain close ties suggests different priorities — chiefly securing funding for “Vision 2030” projects in the face of persistently low oil prices that, OPEC argues, don’t reflect true demand trends.
As for Trump, he faces a double bind: he needs to placate the US oil sector, which is angered by tariffs and low prices, while also maintaining low fuel prices for consumers. Those goals conflict — he cannot achieve “American energy dominance” if drilling becomes uneconomical due to depressed prices.
Although much of the energy media focuses on the Trump-angle in OPEC+ policy, the Organization is acting with confidence — believing that talk of a global oil demand collapse is exaggerated.
Some OPEC+ members have not yet fully ramped up production to agreed levels, which has helped stabilize prices. Moreover, the return to output increases aims also at regaining lost market share, not purely serving other nations’ energy agendas.
In reality, what benefits a major producer tends to benefit all producers: ideal pricing that neither weakens demand nor overheats markets into collapse. As one analyst put it, OPEC+ has avoided flooding the market with oil as in the past — those days of deliberate oversupply are behind us.
