US President-Elect Donald Trump’s strong push for expanded oil drilling in the United States is fueling growing volatility in global oil prices, with concerns about an oversupply of oil intensifying.
Trump’s vocal support for increased domestic drilling has contributed to a sharp decline in oil prices. As of this week, crude oil prices dropped by 4.83%, falling to $68.40 per barrel. Brent crude also saw a 4.32% drop, trading at $72.20 per barrel on Tuesday morning, although prices have since slightly rebounded.
The prospect of increased oil production in the US, driven by Trump’s stance on drilling, has led to market fears of oversupply. This is putting downward pressure on prices, as traders anticipate a rise in global oil production in the coming months.
Adding to these concerns is China’s recently unveiled stimulus package worth 10 trillion yuan (€1.30 trillion). Analysts have expressed doubts about the package’s ability to stimulate significant economic growth, which raises concerns about reduced oil demand from China, a key global consumer.
Meanwhile, OPEC+ has warned that non-member countries are likely to boost oil production in 2025, further heightening fears of oversupply. According to OPEC+ forecasts, these countries could increase their output by 1.3 million barrels per day. The US Energy Information Administration (IEA) also predicts a 1.4 million barrel-per-day rise in non-OPEC+ oil production next year.
OPEC+ is expected to release its November report later today, which could offer further insights into global supply dynamics.
Trump’s policies, aimed at boosting US energy production, have been clear. He has pledged to make it easier for companies to obtain drilling leases and build necessary infrastructure, including pipelines. He also supports lifting restrictions on natural gas exports and expanding drilling on federal land.
In contrast, the Biden administration has imposed stricter regulations, including higher bond requirements and royalty payments for drilling on federal land. The Biden administration has also reduced the number of federal land leases available for oil and gas companies.
Trump has promised that, if re-elected, energy bills could be cut by as much as 50% within 12 months, though details on how this would be achieved have not been specified.
While oil and energy companies have largely welcomed Trump’s pro-drilling stance, there are growing concerns about the potential for short-term price fluctuations and profit losses. These risks are largely tied to the possibility of an oversupply if drilling regulations are relaxed too much.
Trump is also expected to reverse President Biden’s moratorium on liquefied natural gas (LNG) export approvals, a move that could help stabilize the long-term supply of LNG and reduce market uncertainties.
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