How the US-Saudi Arabia Deal May Impact Oil Prices

Donald Trump’s visit to Riyadh in May 2025 culminated in the world’s largest defence deal worth $142 billion to expand Saudi Arabia’s military power. This was part of a $600 billion commitment that Saudi Arabia made to the US, including investments in AI and energy infrastructure. The strategic partnership of the two crude superpowers can potentially impact oil prices, creating opportunities for traders to explore.

Oil Price Dynamics: Impact of the Washington-Riyadh Deal

The agreement came at a point when Saudi Arabia was on track to ramping up production from 2025 through 2028 to over 12 million barrels per day (mb/d). The US production reached a peak of 13.6 mb/d on average in July 2025.  The deal could mean Riyadh’s support for increasing global oil supply. This fits perfectly with Trump’s attempt to bring oil prices down in a bid to stifle the Russian economy.

Note that while lower oil prices are a priority for the US, Saudi Arabia may not fully support the idea. Saudi Arabia’s economy is heavily dependent on oil exports. So, excessively low prices would hurt the country’s GDP. Plus, through 2024 and H1 2025, Chinese demand balanced the supply. If China, which has been stockpiling oil (including imports from Saudi Arabia), chooses to halt crude purchases, prices may sharply decline.

Oil Price Outlook

In its September 2025 report, the International Energy Agency (IEA) projected that global oil production would rise by 2.7 mb/d this year. At the same time, the agency expects worldwide oil demand to grow by only 700 kilo barrels per day (kb/d). Therefore, the IEA estimates global inventories to rise by an average of 2.5 mb/d through H2 2025. Market surplus exerts downward pressure on oil prices. Since oil production increases gradually, this may impact medium-term sentiment among oil traders.

The US Energy Information Administration (EIA) expects Brent crude to trade around $62 per barrel in Q4 2025 and decline to an average of $52 per barrel in 2026. The organisation also points out that the continued conflict in the Middle East and Russia-Ukraine war will continue to impact market sentiment and prices.

Trading Oil? Stay Updated

As price uncertainties create opportunities, it is crucial that oil traders stay updated on the latest news and market sentiment. Here are a few things to keep an eye on.

OPEC+ Announcements

Any update on unwinding supply constraints or initiating a fresh round of supply cuts impacts oil prices. This may, in turn, affect short- and long-term market sentiment.

Policy Announcements

Since the US increased production (and reduced imports), China has replaced America as the most critical oil importer from Saudi Arabia. Any new announcements from the US or Saudi Arabia about the deal or country policies around oil exports/imports may impact oil prices.

Inventory Reports

While IEA releases monthly reports, while the EIA issues weekly US inventory updates. These offer insights into the supply-demand equilibrium that drives market sentiment. Global economic growth projections and investments/regulations in clean energy also influence oil prices.

Geopolitical Factors

Oil prices are affected by geopolitical tensions, especially in the Middle East, since the region impacts the global supply chain.

Oil Trading Strategies 

Oil prices are highly volatile, and trading derivative instruments, such as contracts for difference (CFD), allows you to explore opportunities regardless of the direction of the price move. However, technical analysis is crucial in volatile markets. The following indicators may strengthen your trading strategy:

Fibonacci Retracements

Price often adjusts after a wide swing. This is where retracements help. Fibonacci retracements at certain levels, such as 38%, 50% and 62%, are the most commonly used. These key levels often act as a resistance or support, which can be used as entry and exit points. Fibonacci retracements work for intraday, swing, and trend trading strategies.

Bollinger Bands

This is a volume indicator that also helps identify overbought and oversold conditions. When the price moves beyond the upper band, the market is considered overbought, and a signal to go short. When it moves below the lower band, the market is considered oversold, which signals a buy.

Scalpers can also use Bollinger Bands in their oil trading strategies. The two bands form a channel (or a range). The price bounces off the upper and lower bands during sideways markets. Scalpers take advantage of tiny price fluctuations within the channel.

Considering volume is important in this strategy. A price bounce off any band with high volume may indicate a trend reversal. Indicators, such as On-Balance Volume (OBV), help determine whether the price move is strong enough to reset the trend.

Moving Averages Convergence Divergence (MACD)

MACD is a trend-following momentum indicator. It helps identify entry and exit points in trending markets. A crossover of the MACD line above the faster exponential moving average (EMA) indicates a strong bullish trend. An MACD line that crosses below the faster EMA indicates a strong bearish trend.

It is important to combine technical indicators to confirm the signals generated. Placing stop loss and take profit levels helps manage risk. You can also use trailing stops or partial exits to dynamically adjust risk levels.

To Sum Up

• The US has entered a deal to strengthen Saudi Arabia’s defence power.
• Saudi Arabia will in turn invest in the US technology sector.
• The US and Saudi Arabia may create an oil surplus, which may weigh on oil prices.
• Traders should keep an eye on OPEC announcements, IEA and EIA reports, and geopolitical news to make informed oil trading decisions.
• Technical analysis is crucial to creating a trading strategy for the oil markets.
• Risk management measures, such as stop loss and take profit, are essential in volatile markets.

Disclaimer:

All data, information and materials are published and provided “as is” solely for informational purposes only, and is not intended nor should be considered, in any way, as investment advice, recommendations, and/or suggestions for performing any actions with financial instruments. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation or needs, and hence does not constitute as an advice or a recommendation with respect to any investment product. All investors should seek advice from certified financial advisors based on their unique situation before making any investment decisions in accordance to their personal risk appetite. Blackwell Global endeavours to ensure that the information provided is complete and correct, but make no representation as to the actuality, accuracy or completeness of the information. Information, data and opinions may change without notice and Blackwell Global is not obliged to update on the changes. The opinions and views expressed are solely those of the authors and analysts and do not necessarily represent that of Blackwell Global or its management, shareholders, and affiliates. Any projections or views of the market provided may not prove to be accurate. Past performance is not necessarily an indicative of future performance. Blackwell Global assumes no liability for any loss arising directly or indirectly from use of or reliance on such information here in contained. Reproduction of this information, in whole or in part, is not permitted.