ECmarkets official website: Saudi Arabia's breakthrough under Trump's tariff storm

The whirlwind of the global trade war unleashed by the Trump administration is making waves in the crude oil market. The crisis, while posing a serious challenge to Saudi Arabia, could also be an opportunity for the oil kingdom to reorder the industry. Against the backdrop of global supply and demand imbalances, Saudi Arabia is trying to reshape the oil market in the crisis with a surprisingly tough stance.

Market Dilemma

In recent years, the crude oil market has been struggling under multiple pressures.ECmarkets official websiteGlobal production continues to climb, consumption growth is sluggish, and the long-term demand outlook is uncertain. Despite the OPEC + coalition's efforts to maintain production cut discipline, oil prices are still suppressed in a narrow range of $70-90. As the de facto leader of OPEC, Saudi Arabia has become impatient with the members of the alliance that have repeatedly exceeded production. The three "production deserters" of Kazakhstan, Iraq, and the United Arab Emirates contributed most of OPEC +'s total excess production 1.20 million barrels per day in February alone.

Saudi Arabia's Thunder Tactics

After Trump announced the imposition of tariffs on April 3, oil prices collapsed in response. They have now fallen for the first consecutive trading day, falling by nearly 20%. US crude oil fell below the 60 mark, and Brent crude oil once approached the 60 round mark. Saudi Arabia quickly seized this opportunity to send a strong signal to the market:

Lightning action: The day after the tariff news was announced, Saudi Arabia and seven OPEC + members suddenly announced the accelerated lifting of the 2.20 million barrels per day production cut plan, causing global supply to surge 411,000 barrels per day in May.

Price surprise: Saudi Aramco slashed the price of Asian crude oil in May, and the premium for flagship Arab light crude oil fell by the largest amount in two years, falling by $2.3 to $1.2 per barrel.

These combinations of punches demonstrate Saudi Arabia's determination to restore market discipline even at the cost of short-term financial losses.

Warning of the cycle of history

The current situation is reminiscent of the epic price war launched by Saudi Arabia in 2014. After six months of dumping crude oil, Saudi Arabia managed to cut Brent oil prices in half to $51, which dealt a heavy blow to the US shale oil industry. Now history seems to be repeating itself:

The break-even line for U.S. shale oil is $65, while the current WTI oil price has fallen below $60.

Chart: Oil prices that U.S. oil producers need to see for their operations

Trump's steel and aluminum tariffs have pushed up the cost of shale oil extraction. But this time Saudi Arabia faces a very different situation:

U.S. production has entered the plateau, and crushing shale oil is no longer the main goal

The OPEC + alliance is fragile, and a long-term price war could lead to a system collapse

Saudi Arabia's fiscal balance requires $91 in oil prices, much higher than the $50 offered by allies such as the United Arab Emirates

Road to Breakthrough

The current market turmoil has given Saudi Arabia a rare strategic opportunity to both punish unruly allies and squeeze high-cost competitors. But Riyadh must tread carefully - the price war it is forced into cannot be fought too hard or dragged on for too long. Under the cloud of a global trade war, Saudi Arabia is walking on a risky tightrope, and every decision it makes will profoundly affect the future global energy landscape.