US President Donald Trump stated last week that he would urge Saudi Arabia and other OPEC members to "bring down the cost of oil," suggesting that this could put pressure on Russia to negotiate an end to its war in Ukraine, News.az reports citing News.az.
A cornerstone of Western sanctions against Russia has been the introduction of a $60-per-barrel oil price cap, introduced two years ago, which prevents EU+G7 shipowners, insurers and others facilitating the transport of the country’s crude if it is sold above the threshold. But Russian exporters have largely circumvented this restriction through opaque trading practices and the use of a shadow fleet of tankers and intermediary companies with hard-to-discern ownership. As a result, experts believe that most Russian oil is still sold at prices above the cap even today.Trump often criticised OPEC during his first presidential term for not releasing more oil onto the global market, in an effort to bring down fuel prices for US consumers. Once more he urged OPEC to increase production in a speech to executives at the World Economic Forum in Davos on January 23, saying he was “surprised” that the group had not lowered oil prices before the US elections.
"Right now the price is high enough that that war will continue," he said, suggesting that high oil prices were helping Moscow fund its conflict in Ukraine. "You gotta bring down the oil price. That will end that war. You could end that war."
On the previous day he spoke with Saudi Crown Prince Mohammed bin Salman (MbS).
“Russia is gaining billions of dollars of money from oil sales,” Keith Kellogg, Trump’s special envoy for Ukraine and Russia, said in an interview with Fox News on January 24. The world cannot get Moscow to bring an end to the fighting just by helping Ukraine on the battlefield, he said.
“Russia is gaining billions of dollars of money from oil sales,” Kellogg said. “What if you drop that to $45 per barrel, which is basically a baseline breakeven point?”
Oil outlook
The OPEC+ alliance, which includes not only OPEC members but other major producers including Russia, have been constraining their combined output since 2020. Currently, their collective production cuts amount to 3.66mn barrels per day (bpd) and are due to remain in force until the end of 2025, after the group earlier delayed the ending of the restrictions by a year. A number of OPEC+ members – Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman – have committed to additional voluntary cuts totalling 2.2mn bpd. The current plan is to phase out these voluntary reductions gradually between April this year and September 2026.
OPEC+ has resisted easing its cuts in the face of uncertainty about the future oil demand-supply balance. Brent is now trading at $78 per barrel, down from a peak of over $90 per barrel seen in April, with the decline driven by a global economic slowdown and rising production in the US and elsewhere. The US Department of Energy (DoE) forecast this month that Brent would slide by 8% year on year to $74 per barrel in 2025, as a result of rising global stocks, with a further drop of 11% expected in 2026. Supply growth is projected to exceed demand growth by 0.5mn barrels per day in 2025 and by 0.4mn bpd in 2026, the DoE said. Additionally, global commercial oil inventories are expected to grow by 0.3mn bpd in 2025 and by 0.7mn bpd in 2026.
The World Bank predicted last autumn that 2025 would see one of the biggest oil gluts on record, with supply surpassing demand by 1.2mn bpd. Bigger gluts have only been seen two times before – during pandemic-related shutdowns in 2020 and the 1998 oil price collapse.
Would OPEC play ball?
Saudi Arabia and other OPEC members are likely to resist Trump’s call to pump more oil if they determine that doing so is not in their economic interest, especially given that oil prices are forecast to decline anyway next year, in part because of the group already planning to ease voluntary cuts from April. However, they may be incentivised to do so to protect their market share, including from US shale producers. US oil production broke a new record last year, reaching 13.25mn bpd.
Guyana is also on track to continue expanding output thanks to the development of major offshore field developments, and growth is also anticipated in Canada, supported by projects such as the Trans Mountain Expansion (TMX), as well as in China.
Should Trump succeed in convincing Saudi Arabia to help lower oil prices, Riyadh will seek something in return. This could include increased US military support, investment and favourable trade deals. And even then, lower oil prices may not convince Russia to make the desired concessions in the Ukrainian conflict, if Moscow feels its security concerns have not been adequately addressed.
