President-elect Donald Trump’s oil-friendly policies could lead to a significant increase in U.S. crude production. His promise to accelerate drilling and ease regulations in the oil and gas industry is expected to boost output.
However, analysts warn that this surge in production could clash with an oversupplied global oil market. Rising output from non-OPEC+ producers is predicted to create a substantial surplus in 2025, even if OPEC+ gradually restores its supply as planned starting in April.
Currently, global supply is forecasted to exceed demand by about 1 million barrels per day (bpd) in 2025. Observers say geopolitical factors will likely influence oil prices, with Trump’s policies on Iran, Venezuela, and Russia acting as key uncertainties. Tariffs and their effects on U.S. energy prices, the domestic economy, and global growth also remain critical factors.
Non-OPEC+ Supply Expected to Grow
Market outlooks suggest bearish trends for supply. Non-OPEC+ production, driven by countries like the U.S., Brazil, Guyana, and Argentina, is projected to rise and counterbalance much of OPEC+’s ongoing cuts. Currently, OPEC+ maintains over 2 million bpd of cuts, ensuring a global spare capacity of more than 5 million bpd, mainly in Saudi Arabia, Iraq, the UAE, and Kuwait.
“The market isn’t overly worried about supply in the near future, particularly given weaker-than-expected Chinese oil demand in 2024,” said Andy Lipow, president of Lipow Oil Associates, in an interview with Yahoo Finance.
Projections for China’s oil demand growth have consistently dropped throughout the year, starting at 700,000 bpd in January and falling to just 180,000 bpd by December, Lipow noted.
Modest Demand Growth and Stable Prices
With modest demand growth and strong supply increases from non-OPEC+ producers, oil prices are expected to remain steady. Analysts predict Brent Crude prices will stay in the low $70s, with WTI Crude hovering around $70 per barrel through 2025.
Even with OPEC+ planning to ease its production cuts in April, the market is likely to see a supply surplus next year. Earlier this month, OPEC+ postponed the start of its production cut rollback to April 2025, pushing the full unwinding of these cuts into September 2026.
According to the International Energy Agency (IEA), if OPEC+ maintains its current production levels throughout 2025, the surplus will reach 950,000 bpd. If the group begins easing cuts in late March, the surplus could grow to 1.4 million bpd.
Geopolitics and Tariffs Could Shift Outlook
Despite bearish supply fundamentals, Trump’s geopolitical moves and tariff policies could quickly alter market dynamics. Stricter U.S. sanctions on Iran or rising geopolitical tensions could push oil prices higher.
“Going short now takes courage,” said Frederic Lasserre, Global Head of Research & Analysis at Gunvor, in a statement to Bloomberg. “The fundamentals may not look strong, but geopolitics will definitely play a role next year.”
While supply is expected to outpace demand, the oil market remains at the mercy of unpredictable political decisions and global events, leaving room for surprises in 2025.
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