Gulf ready for high-energy talks when Trump comes to town

• Trump in Gulf May 13-16
• President wants lower oil prices
• Gulf states have own priorities

Security, technology transfer and inward investment into the US may dominate the headlines but Gulf leaders meeting President Donald Trump this week are also likely to raise a raft of more humdrum energy issues.

For Trump, who will be making the first state visit of his second presidency from May 13 to 16, cheaper gasoline at the pump is a priority for his administration and his blue collar base.

So far, the markets have been kind. In the first quarter, Brent averaged $75 per barrel and is now hovering around $60 a barrel since the launch on April 2 of the new president’s tariff war.

Such prices are not what the Arabian Gulf producers are looking for. But the three hosts are under different degrees of pressure and are likely to have different agendas. 

For Doha it is gas. Qatar is due to almost double capacity in its already massive liquefied natural gas (LNG) business from 77 million tonnes per annum to 142 mtpa. 

Doha also has a 70 percent stake in the delayed Golden Pass LNG project in Texas which has now gained approval to resume development. Trump was quick to lift a moratorium issued by the Biden administration on new permits to sell US LNG abroad. 

But even Doha will be worried about prices. The US has dramatically raised its LNG capacity and Trump has signalled an ambition to increase natural gas production by a further 60 percent.

The Golden Pass terminal, for example, was initially planned to import Qatari LNG, but has now pivoted to exports because of that additional US supply.

AGBI columnist Matein Khalid thinks Asian countries, which are the main consumers of Gulf gas but run substantial trade surpluses with the US, are now likely to increase LNG imports from America in the hope of avoiding Trumpian tariffs. That is not good news for Qatar. Nonetheless Doha can cope.

Abu Dhabi is also in a relatively comfortable position. In April Mubadala Energy, part of the UAE capital’s constellation of sovereign wealth funds, said it too was buying into US LNG by way of a stake in Kimmeridge Texas Gas.

But the UAE is also relatively wealthy. Its priorities during the Trump visit are likely to revolve around access to technology and ambitions to become a manufacturing hub. 

It is Saudi Arabia, the world’s biggest oil exporter and the Gulf’s largest economy, which has the most to lose – and gain – during the Trump trip. The kingdom posted a fiscal deficit of nearly $16 billion in the first quarter, more than half the total projected for 2025. 

Goldman Sachs projects that Saudi Arabia needs to bring in an additional $135 billion this year and next to plug a financing gap. If the price of oil falls to below $40 a barrel, that number rises to $265 billion.

The situation has been exacerbated by last weekend’s decision by the kingdom and seven members of Opec+ to treble the volume of barrels they add to the market in June.

Saudi officials will make it clear to their visitor that they cannot live with oil prices like this in the medium term.

Imposing pressure

A positive for all Gulf exporters is that Trump said on Wednesday that Yemen’s Houthis, who have disrupted trade and energy flows with attacks on vessels in the Red Sea, had agreed to cease missile attacks. Qatari LNG cargoes, for one, have been disrupted by Houthi attacks in the Red Sea. 

The Gulf hosts will be watching closely to see how the administration views Iranian barrels. In the days of Biden, the Islamic Republic was able to export around 1.5 million barrels a day, despite a formal array of sanctions against it. 

Since then, Trump has been strident in reimposing his policy of maximum pressure on Tehran.

For the avoidance of doubt, he wrote on Truth Social: “Any Country or person who buys ANY AMOUNT of OIL or PETROCHEMICALS from Iran will be subject to, immediately, Secondary Sanctions….. They will not be allowed to do business with the United States of America in any way, shape, or form.”

The US and Tehran have been conducting negotiations over Iran’s nuclear programme but if those break down, pressure on Iran is likely to become even greater.

Washington has since then imposed sanctions on several small Chinese refineries, accusing them of processing Iranian crude.

There is also the prospect that Washington will move against Iraq. Hawkish members of the administration have accused Baghdad – already a sizeable quota-buster within Opec+ – of acting as a conduit for Iranian barrels.

It may be that Washington announces sanctions on Baghdad to seek to squeeze out those exports. 

Riyadh will not say so in public but any constraints on Iraqi barrels and on remaining Iranian exports are likely to be very welcome in the kingdom – although less so for US consumers at the gasoline pump.