Oil & Gas Trump’s oil policy ‘problematic’ for Gulf producers, economists warn By Nadim Kawach January 22, 2025, 3:43 PM Alamy via Reuters Connect Oil refinery worker. Saudi Arabia and other Opec members could be forced to boost output to offset a short-term loss in income, says one expert Plans to raise US production Oil prices ‘could plunge to $50’ Riyadh may have to borrow more Gulf oil producers should be worried about President Donald Trump‘s energy policy, economists have warned, as it could widen their budget deficits. Oil prices have already dipped in response to Trump’s pledge on Monday to boost US hydrocarbon production and they could plunge far below the breakeven prices adopted by Gulf governments in their annual budgets. Prices are already below Saudi Arabia’s $90 breakeven price but if they continue to lose ground, the country’s fiscal deficit could expand further and this may force it to borrow more to fund the Vision 2030 programme. “Assuming Trump’s policy will depress oil prices to $65-75, some Opec members will suffer from higher deficits,” said Saeed Al Shaikh, former chief economist at Saudi National Bank (previously known as National Commercial Bank). “The breakeven price in Saudi Arabia’s budget is $90 and this will lead to a higher shortfall.” Writing in the Saudi Al Mal newspaper on Tuesday, Al Shaikh said a large drop in crude prices could force Riyadh to revise its own oil production policies. Saudi Arabia and other Opec members might have to raise output to offset any short-term loss in their income, he wrote. “An opposite option is that they may resort to further painful production cuts and this could damage solidarity among Opec and non-Opec producers and adversely affect their consensus regarding output policies,” Al Shaikh added. “At the same time, a decision to cut output faces big challenges as we still recall that Russia hesitated in agreeing on cuts a few years ago. Should this happen again, then Opec and its allies will face a tough task in stabilising prices.” Over the past few years, Saudi Arabia has spearheaded market efforts to prop up oil prices through collective output cuts. It is pumping at least 2 million barrels per day below its actual production capacity of 12 million bpd. Frank Kane: He came in like a wrecking ball but how will oil markets react? Iraq makes huge oil discovery but faces Opec restrictions Trump inauguration: Saudi Arabia comes into focus Kuwait, another Gulf Opec member, had assumed an oil price of $70-75 in its budgets over the past few years before lifting it to $90, according to the Al Shal think tank. Despite spending restraints in line with International Monetary Fund recommendations, Kuwait is expected to record a shortfall of around $10.7 billion in its 2024-26 budget due to the Opec+ cuts, Al Shal said. Iraq is also heavily reliant on oil sales to fund its budget and post-war reconstruction and this has created persistent gaps in its fiscal system. “I am afraid that oil prices could plunge to $50 a barrel due to Trump’s policies,” said Abdul Rahman Al Mashadani, an economics professor at Baghdad University. “There is a possibility that Trump will pressure Saudi Arabia and other producers to boost crude supplies and this could further depress prices," he told the Alforat News agency. "Iraq will be a key victim as nearly 90 percent of its revenues come from oil exports.” Al Mashadani said a $1 decline in oil prices equated to a loss of $1.4 billion in Iraq’s budget, which is based on production of 4 million bpd.
