The cost of $50 oil: Can Trump’s energy ambitions avoid being squeezed between Saudi Arabia and shale oil?

The Trump administration's push for a $50 per barrel oil price target is not out of reach, but realizing and maintaining this ambition will face complex market games and the risk of a potential supply-side rebound.

Before news broke that Venezuelan President Maduro was under U.S. control, U.S. benchmark crude futures were already hovering near $57 a barrel, and had at times even fallen below the $60 mark. Driven by strong output from Brazil, Guyana, and Canada, the market was already facing pressure from excess supply. The U.S. Energy Information Administration (EIA) pointed out in its December forecast that by 2026, global daily oil inventory increases would exceed 2 million barrels. In this context, Venezuela’s potential production recovery would further push prices down.

Goldman Sachs predicts that if Venezuelan daily output increases by 400,000 barrels, this year’s average crude price may drop to $50 per barrel. Although Venezuela’s share of global crude production is currently less than 1%, this increment is enough to put real pressure on market pricing.

However, this low oil price environment faces severe challenges from the world’s two major supply forces—OPEC+ and U.S. domestic producers, which respectively account for about half and one-fifth of global supply.

Venezuela: A viable path for short-term production increase

According to a previous article from Jianwen, on January 7 local time, Trump and his advisors were planning to dominate Venezuela’s oil industry in the coming years. The president told aides he believes his efforts can help bring oil prices down to his desired level of $50 per barrel.

The country currently produces about 900,000 barrels per day. Goldman Sachs points out that through relatively short-term remedial measures, such as providing more light diluents for blending heavy crude, repairing damaged wells and upgrading facilities, and lifting sanctions, Venezuela is expected to increase its capacity in the short term.

According to RBN Energy analyst Robert Auers, although adding several hundred thousand barrels of daily output may seem small, it is enough to “meaningfully push prices downward.” For example, an increase of 400,000 barrels would be about half the amount of global oil demand growth projected by the International Energy Agency (IEA) for 2026.

Gary Ross, CEO of Black Gold Investors, further points out that if sanctions are lifted, the U.S. would access Venezuelan crude faster than other regions globally. This would not only help suppress benchmark prices but also alleviate the heavy crude shortage faced by U.S. refineries. RBN Energy Managing Director John Auers notes that with Mexican production declining long-term and more Canadian crude flowing to the West Coast after pipeline expansions in 2024, U.S. refineries urgently need cheap Venezuelan heavy crude to fill the gap. This means that even if the benchmark price does not fully fall to $50, it could still effectively lower gasoline costs for U.S. consumers.

OPEC+’s Fiscal Red Line and Response

A low oil price environment will undoubtedly touch the sensitive nerves of OPEC+ core members such as Saudi Arabia.

Gary Ross believes that Saudi Arabia will not be satisfied with Brent crude prices in the $50+ range. According to estimates from the International Monetary Fund (IMF), Saudi Arabia’s fiscal breakeven oil price in 2026 is as high as $86.60 per barrel. Most OPEC members also need oil prices above $60 to balance their fiscal budgets.

Although OPEC+ recently confirmed that it will maintain stable production by the end of March, and Saudi Arabia may be reluctant to publicly clash with the Trump administration, the possibility of OPEC choosing to cut production is not zero if the fiscal pain from low oil prices intensifies. Notably, Saudi Arabia’s decision-making logic is often unpredictable. During previous periods of low oil prices, Saudi Arabia sometimes chose to increase production to defend market share rather than cut it, adding uncertainty to the future direction of the market.

Currently, Brent crude prices are up 0.74%, holding around $62 per barrel.

Break-even Point for U.S. Shale Producers

In addition to OPEC+, U.S. domestic shale oil producers are also facing the test of survival. Dan Pickering, Chief Investment Officer of Pickering Energy Partners, points out that a price range of $55-$60 has not triggered large-scale production cuts yet, but if prices fall below $55, things may change. A Dallas Fed survey last year showed that producers in the Permian Basin generally believe that West Texas Intermediate (WTI) prices need to remain around $61-$62 for new wells to be profitable.

As one of the largest independent producers in the Permian Basin, Diamondback Energy clearly stated in its earnings call last year that if oil prices remain at the “low $50” level for a month, the company may have to consider cutting investment. This means that overly aggressive price suppression may weaken U.S. domestic capacity, undermining supply-side stability in the medium-to-long term.

For the White House, as midterm elections approach, lowering oil prices is certainly a core agenda item, but keeping prices slightly above $50 per barrel might be the best balance—appeasing American drivers while ensuring the survival of large oil producers.

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