US oil & gas policies may have bearish impact global petroleum prices

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Last Updated08/11/2024

As Republican presidential candidate Donald Trump wrested the White House from the Democrats, international oil prices declined Wednesday.

Following Donald Trump’s re-election, international oil prices saw a decline. Although this was influenced more by a stronger dollar, symbolic implications for oil markets remain, as Trump’s policies are expected to exert some downward pressure on oil prices.

Tariffs and Global Demand: Trump’s proposed high tariffs on imports, especially from China, could reduce global oil demand, as China is the largest oil importer.
Increase in US Production: Trump's "Drill, baby, drill" policy, aimed at boosting US oil production and exports, could raise global supply and increase competition among oil-producing nations, potentially pressuring prices downward.

Balanced Market Goal: Analysts predict that Trump’s administration will strive to maintain a balanced global oil market to stabilize prices and avoid drastic drops that could harm US oil producers.
Limited Control Over Prices: While Trump has pledged to reduce energy costs, the administration has limited tools to directly influence oil prices significantly.

Sanctions on Iran and Venezuela: Stricter sanctions on Iran and Venezuela may reduce oil supply in the global market, but the impact may be limited.

Benefit from Lower Oil Prices: India, a major crude importer, would benefit from downward pressure on oil prices, easing issues related to trade deficit, inflation, and currency stability.
Increased Opportunities for US Oil Imports: S&P Global Commodity Insights (SPGCI) expects US crude to be more competitively priced in Asia, offering India increased import options. The US currently ranks as India’s fifth-largest oil source.

US-OPEC Competition: With rising US crude production, competition with OPEC countries in Asia is expected to intensify, with the US also targeting European, African, and Latin American markets.
Challenges for OPEC+ Amid Rising US Production:
Pressure on Prices and Market Share: Increased production from the US and other non-OPEC countries (e.g., Brazil, Guyana, and Canada) has weakened the impact of OPEC+ output cuts, challenging the bloc's influence on prices.

Support for Domestic Oil and Gas: According to Kpler, Trump is likely to back domestic oil and gas producers, promote energy infrastructure, and relax emissions standards.
Permit Issuance and Regulatory Rollbacks: Trump’s administration is expected to fast-track drilling permits and revoke environmental regulations set by the previous administration, including greenhouse gas reduction targets.

Production Growth Slowing: US oil production growth is projected to slow in 2025 due to increased OPEC supply, with Kpler estimating growth of 110,000 barrels per day (bpd) compared to 360,000 bpd in 2024.
Market-Driven Production: Despite Trump’s pro-fossil fuel stance, market prices and profit margins are seen as more influential on production levels than presidential policies.