Oil Will Aid Rather Than Hinder Trump-MbS Bromance

Reuters Breakingviews – Donald Trump and Mohammed bin Salman each have contradictory objectives in 2025. The U.S. president-elect wants to apply “maximum pressure” on Iran, but won’t want the spike in oil prices that may accompany it. The Saudi crown prince is sick of forgoing oil revenue by pumping 3 million barrels below his 12 million barrel daily capacity – but will be wary of a price crash if he opens the taps. Even so, there’s a way for their bromance to bloom.

On the face of it, there’s much for MbS and Trump to disagree about. If the new president delivers on pledges to slash permitting times and enable fossil fuel companies to “drill, baby, drill”, then oil prices could pitch even further below the $100 a barrel level at which the Saudi budget balances. Unlike Trump’s first term, MbS has been getting closer to Iran via talks brokered by another Trump foe – China. And Saudi’s predominantly youthful 33 million population is naturally sympathetic towards Palestinians – which might jar if Trump brokers a ceasefire deal that seems overly generous to Israel.

Still, MbS-Trump relations are likely to be significantly warmer than the crown prince’s frosty relations with President Joe Biden. Trump and adviser Elon Musk were seen recently at an Ultimate Fighting Championship bout with Yasir Al-Rumayyan, boss of Saudi’s $925 billion Public Investment Fund. And oil dynamics may help rather than hinder.

At 13 million barrels, U.S. daily oil production is the highest in the world. But according to Goldman Sachs, the crude price required in the key Permian region to drill new wells and manage a 15% return is the $70 a barrel at which it traded in late November. Most U.S. oil production is on private land rather than the public areas Trump controls. With forecasters like the International Energy Agency anticipating a price-sapping supply glut of 1 million barrels a day in 2025, and the Organization of the Petroleum Exporting Countries and affiliates like Russia keen to unwind production cuts, it’s possible the U.S. oil flood is more like a trickle.