By Ron Bousso, Energy Columnist

Greetings Power Up readers,

Oil prices' wild roller coaster ride continues. In the week through Tuesday, benchmark prices climbed steadily to $67 a barrel on easing trade tensions between the United States and China. But prices have since tumbled to below $64 following signals that Washington and Tehran could be nearing a deal over Iran's nuclear programme. 

All this took place while U.S. President Donald Trump was on a tour of the Gulf states, his first major overseas trip since taking office. The Saudi Arabia leg of the journey was filled with pomp and ceremony as well as promises of huge trade deals between the two allies. But one word was conspicuous in its absence: oil. More on this below

I would love to hear from you, so feel free to send your feedback on the newsletter and my columns to ron.bousso@thomsonreuters.com.

Oil barely garnered a mention from U.S. President Donald Trump during his glitzy visit to Saudi Arabia this week. But the black gold may explain why the trip went so smoothly.

Trump lavished praise on Saudi Crown Prince Mohammed bin Salman, known as MbS, in his speech on Tuesday at an investment summit in Riyadh as the Kingdom unveiled a $600 billion package for investment in the United States and Trump touted a $142 billion defence deal.

Yet there was no public mention of the main thing that has tied the two countries together over the past century: oil.

For decades, Washington and Riyadh have nurtured close ties based on Saudi Arabia's pivotal role in the oil market and America's strategic interests in the Middle East. This translated into hundreds of billions of dollars of military and economic support for Saudi Arabia over the years.

For decades, Saudi Arabia was a major supplier of crude oil to the United States, with imports peaking at 2.2 million barrels per day in 2003, according to data from the Energy Information Administration. But with the surge in domestic U.S. oil production in the Gulf of Mexico and onshore shale basins in recent decades, Saudi exports gradually slid to around 275,000 bpd in 2024, less than 1.5% of total U.S. consumption.

The decline in American dependence on Saudi petroleum had caused some U.S. politicians to question the alliance, including Trump's predecessor Joe Biden, who sought to make Saudi Arabia a pariah over the country's human rights record.

But Trump used the first major overseas trip of his second term to send a clear message about the U.S. commitment to this partnership.

The Kingdom, in turn, may have helped ensure the trip’s success by taking steps beforehand to help lower oil prices, right as the president was facing scrutiny over his tariff policies.

Graphics are provided by Reuters.

Saudi Arabia remains hugely influential in setting global oil prices through its iron-fisted leadership of the Organization of the Petroleum Exporting Countries, the cartel of producers founded in 1960 that today controls around 40% of global crude supplies. That influence was expanded in 2016 when OPEC formed an alliance with Russia and other producing nations known as OPEC+.

Trump clearly recognizes this power. He called for OPEC, opens new tab to boost output in order to keep U.S. gasoline prices down days after taking office.

Wanting to rein in energy prices is normal for any U.S. president, but it became doubly important for Trump after his tariff sweep of April 2 launched the United States into a trade war that risks increasing consumer prices.

Given this backdrop, it’s notable that Saudi Arabia recently made a dramatic shift in policy, pushing OPEC+ to increase oil output sharply into a market that was already well supplied, even as the demand outlook was tanking due to Trump’s trade war.

The group's decision to boost output by 411,000 bpd in May and again in June helped send oil prices tumbling to around $60 a barrel in early May from $82 a barrel at the start of the year. Prices are currently at around $66 a barrel.

The timing of these supply increases was a bit head-scratching. But they make a lot more sense if the Saudis were seeking, at least in part, to give Trump a hand as he sought to pursue his ambitious economic and geopolitical agenda.

Going back to thawing U.S.-China trade tensions, my colleague Clyde Russell wrote that while the two countries’ moves to reduce import tariffs on each other have been broadly welcomed by markets, the de-escalation will do very little to restore the trade in energy commodities.

Reuters reporter Sarah McFarlane wrote a fascinating article explaining that U.S. energy officials are now reassessing the risk posed by Chinese-made devices that currently play a critical role in renewable energy infrastructure after unexplained communication equipment was found inside some of them.

Reuters columnist Gavin Maguire wrote that even though the world's largest power polluter, China, has made its biggest cut to power emissions since 2020 so far this year, global power emissions have still remained largely flat due to higher fossil fuel power generation in the United States and Europe. 

And finally, Reuters columnist Jamie McGeever asks a good question (and provides some answers, too): What was the point of April's market chaos?

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