Oil market braces for impact of closer US, Saudi, Russian cooperation

As US President Donald Trump attempts to tighten the screws on Iran's oil petroleum industry, his overtures to Russia and Saudi Arabia are reconfiguring the politics of the global oil market.

The recent Saudi-mediated talks between the US and Russia in Riyadh brought together the world's three largest crude producers, who control almost a third of global supply.

Saudi Arabia and Russia co-chair the OPEC+ alliance of crude exporters, which the US has long viewed with suspicion. But with Trump eager to broker an end to the war in Ukraine and also heaping pressure on OPEC+ to lower oil prices, his administration has made a calculated decision to keep the two market rivals close.

Although Washington is unlikely to accept any coordination on production levels, it could be a major force in influencing supply dynamics and prices.

"If the US-Russian rapprochement is not derailed, the US under Trump will be involved in global oil matters at the highest levels with Saudi Arabia and Russia," said Jim Burkhard, S&P Global Commodity Insights vice president and head of research for oil markets, energy and mobility.

Confirmation from Saudi Arabia and seven other OPEC+ countries March 3 of plans to ease output cuts from April was the first sign that the group is taking heed of Trump's demand for OPEC and Saudi Arabia to put more oil on the market.

The move has now sent Brent futures tumbling below $70/b, after OPEC+ had repeatedly delayed easing the 2.2 million b/d of voluntary cuts due to sluggish prices.

Among analysts attempting to interpret the latest social media posts, government statements and meetings in Riyadh, one hedge fund manager is making the rounds advocating for the US to join OPEC+.

"It would allow America to really implement a maximum pressures campaign on Iran, and then I think it would also create some welcome tension in the relationship between China and Russia," Sean Fieler, chief investment officer for Equinox Partners, told Platts.

The Trump administration has said it wants to reduce Iran's crude exports to zero in order to bring Tehran to curb its nuclear program.

The US currently produces roughly 13.5 million b/d of crude, above OPEC kingpin Saudi Arabia, which in January pumped 8.97 million b/d, according to the latest Platts OPEC+ survey. Riyadh, however, claims the capacity to produce up to 12 million b/d-12.5 million b/d if you include its share of the Neutral Zone with Kuwait.

Russia, meanwhile, pumped 8.96 million b/d in January, according to the Platts survey, well below the levels it was producing before its invasion of Ukraine in February 2022, due to Western sanctions as well as its OPEC+ commitments.

Open to dialog

The White House and US Department of Energy declined to comment on their approach to OPEC and OPEC+, though sources have told Platts that some talks have occurred.

Tommy Joyce, DOE's acting assistant secretary for international affairs, in February attended the annual IEA-IEF-OPEC summit in Riyadh, where he met with OPEC Secretary General Haitham al-Ghais, according to people familiar with the matter.

The OPEC secretariat did not respond to a request for comment, but Ghais has said previously that he is always open to dialog with US officials.

OPEC's engagement with American shale producers sparked a 2024 antitrust investigation by the US Federal Trade Commission under the Biden administration, but now that Trump has taken office, Washington is likely to take a more sanguine line on similar interactions, legal experts say.

Some OPEC+ delegates said that they are not aware of any plans for future talks with US officials.

"However, this does not rule out the possibility of unofficial talks with Saudi Arabia and Russia. These matters are closely tied to foreign policy and the broader strategic economic vision of each country, making them highly sensitive," one delegate said on condition of anonymity.

Analysts are skeptical that the US could play a role in OPEC or OPEC+, as the alliance aims to balance the market and sustain oil prices, while Trump pushes for maximum production and lower prices.

"I think that even if OPEC does bring back some production, as I expect they will, even if that is under the influence and pressure from the US, I don't know if they will ever explicitly say so. There could be some kind of agreement behind closed doors," said Roukaya Ibrahim, commodity and energy strategist at BCA Research.

Indeed, in defending its decision to begin raising production from April, OPEC+ made no mention of the US in its announcement, but cited "healthy market fundamentals."

There are also a number of logistical barriers to the US entering any kind of agreement with OPEC or OPEC+, including US antitrust legislation, the complexity of distributing cuts among US producers, and the likely negative impact on investor sentiment.

One option is to invite US officials to OPEC or OPEC+ talks as observers or to join the OPEC+ Charter of Cooperation. Already signed by Brazil, the charter is a platform for dialog and does not include production quotas.

US-Russia dialog has already increased since Trump took office in January, as he pushes for a deal to end the war in Ukraine. He is expected to meet his Russian counterpart Vladimir Putin in the near future for talks likely to take place again in Riyadh. Putin has suggested that Russia, Saudi Arabia and the US should hold trilateral energy talks.

"I do anticipate that there will be more alignment on US energy policy with countries like Saudi Arabia and even Russia, and there are common interests from the US oil patch and OPEC, including even in preference for longer-term energy price and demand outlook," said Rachel Ziemba, a senior adviser at Horizon Engage.