Petrodiplomacy on tap as Trump readies for Middle East trip

US President Donald Trump is set to make his first foreign policy trip overseas to the oil- and gas-rich Middle East from May 13-16, with energy sure to be high on the agenda.

Oil markets will be monitoring talks between the US -- the world's largest crude producer and consumer -- and core OPEC members Saudi Arabia and the UAE, as any trade deals, clarity on sanctions, and discussion over prices could prompt shifts in supply and demand dynamics.

"A secure and stable Middle East means greater prosperity for our partner nations and the United States," a White House official said. "President Trump will discuss investment and economic cooperation with these foreign leaders, among other topics."

The Saudi Energy Ministry declined to comment on the agenda for Trump's visit.

Trump has previously pushed for OPEC and its Russia-led allies to keep oil prices low. Recent announcements by Saudi Arabia, the UAE, and six other OPEC+ members to accelerate production hikes may have been made with an eye on the US president's trip, according to some analysts.

The trip is also occurring in the shadow of hostilities in the Middle East, with the US and Iranian-backed Houthi forces in Yemen recently announcing a ceasefire that could bring relief to shippers in the Red Sea. But the war in Gaza continues, and US-Iran negotiations over a nuclear deal that would relieve sanctions on Iranian oil exports appear to have stalled.

Saudi-based independent energy consultant and analyst Abdulaziz al-Muqbil said that Washington and Riyadh share common objectives in fostering a stable and supportive environment for the oil and gas sector, but geopolitics are becoming more and more important.

"Strategic priorities are evolving, and while oil remains significant, broader regional security concerns are increasingly shaping bilateral engagement," he said.

Trump is due to touch down in Riyadh on May 13, where he is expected to hold bilateral meetings with Saudi Crown Prince Mohammed bin Salman.

A summit with leaders of Gulf Cooperation Council countries is planned for May 14, after which Trump will visit Qatar, the world's second largest LNG exporter after the US.

Trump is then scheduled to travel to the UAE for bilateral meetings on May 15.

While on the trip, the president is expected to announce a flurry of trade deals, many of which could involve the major national oil companies in the region.

Middle East producers will be keen to hear updates on US plans for trade policy, with escalating tariff tensions creating major uncertainty on oil demand growth -- leading OPEC+ to switch to monthly announcements on production policy.

The US also plays a major role in energy security in the Middle East, with forces positioned in the region, although Saudi and Emirati officials have sought a more robust deterrence to defend energy infrastructure and protect shipping lanes.

A new Iran nuclear deal could reduce regional risks to oil production, even as it would allow more Iranian oil to hit the market, in competition with Arab OPEC+ supplies.

Jon Alterman, director of the Middle East program at the Washington-based Center for Strategic and International Studies, said that the Gulf states are more supportive of US-Iran talks now than they were in 2015.

"I think, as the Iranians are looking at their abilities to strike back if they're attacked, the Gulf states reasonably conclude that they are likely to be targeted in some way if they seem too close to an aggression against Iran," he said.

Trump said May 6 that the US has reached a deal with Houthi fighters that will end US bombing of Houthi territory in Yemen. In return, the Houthis would cease attacks on US vessels in the Red Sea.

For now, however, shippers remain cautious about returning to an area that has seen so many attacks in recent years. Many continue to choose the longer route around Africa instead of transiting through the Red Sea.

OPEC+ boost

Ahead of the talks, Saudi Arabia, the UAE, and other OPEC+ countries implementing voluntary crude production cuts agreed to increase quotas by 411,000 b/d in June -- the second consecutive above-plan monthly increase.

The output hike, along with a similar increase in May, has weighed on crude prices, which were already reeling from Trump's escalation of tariffs.

Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $62.32/b on May 8, down from $80.75/b on Jan. 20, when Trump was inaugurated.

CSIS senior fellow Clayton Seigle described the OPEC+ move as a "double win."

"It scores points with President Trump and it recaptures some market share that has been lost to US exporters and others in recent years," he said.

The OPEC+ output increase was also signed off by Russia, the largest non-OPEC producer in the group. This comes as US officials are playing a central role in negotiations to end the conflict in Ukraine.

Russian President Vladimir Putin has called for trilateral energy talks with the US and Saudi Arabia -- an alliance that would put together the world's three largest oil producers.

Booming US production in the past has been a major headache for OPEC+ members, who have felt compelled to cede market share with production cuts to bolster oil prices.

US crude output rose to 12.6 million b/d in March, from 11.8 million b/d at the start of 2023. But some analysts say US production growth may soon be peaking, and the current low oil price environment has not encouraged shale companies to seek out drilling rigs.

"I don't think [US production] forms any concerns for OPEC+ at this stage," said Yousef al-Shammari, president of the London College of Energy Economics.