Donald Trump’s victory to keep crude prices volatile

Crude prices have remained volatile following Donald Trump’s victory over Kamala Harris on 5 November, with downward pressure coming amid a stronger US dollar and uncertainty regarding tariffs on Chinese imports, which could spark a trade war and weigh on global crude demand.

Crude prices have remained volatile following Donald Trump’s Presidential victory, with WTI temporarily falling below $70/bbl on 6 November. Downward pressure has been coming from a strengthening in the US dollar, with the greenback recording its best day versus other currencies since 2020. Uncertainty regarding tariffs on goods from China and Europe, which could spark a potential trade war, adding additional pressure on global crude demand, as well as Donald Trump’s willingness to ramp up domestic production (‘drill baby, drill’), the potential for easing sanctions on Russia, and the prospect of peace in the Middle East have contributed to the recent volatility as well.  

It should be noted, however, that the short term remains more promising for global crude prices, with tensions between Israel and Iran to remain high for the time being. In fact, Donald Trump could restrict Iran’s ability to export crude. This would disrupt Iranian crude supplies in 2025, thereby tightening a longer-than-typical global crude balance in 2025. While the actual impact on the latter is still uncertain, such a scenario could allow OPEC+ to partially unwind their voluntary cuts.

At this time, we do not expect OPEC+ to unwind their voluntary production cuts over the next year. In fact, the global crude and condensate balance will average a large surplus over the next six months (except for December 2024) and will remain well above normal levels over this period (see chart below), keeping crude prices rangebound and around current levels for the coming months.

Global crude and condensate balance, Mbd

Source: Kpler

One of the largest drivers of a lengthening in global balances (besides an expected weakening in refining margins and a resulting decline in throughput over Q1 2025) has been a recent ramp up in production from non-OPEC+ countries, such as Brazil, Canada, and the US. These three countries are currently producing at or just shy of all-time highs, with the latest monthly production data from the EIA showing US supply averaging 13.4 Mbd in August.  

Weekly data from the EIA has implied further growth since, in line with our assumptions, with oil majors, such as Chevron and ExxonMobil ramping up production, which will lift production to 13.6 Mbd over the remainder of the year. Despite Donald Trump’s ambitions to ramp up drilling in the US, we expect several factors to keep a lid on production in 2025. This includes a decline in upstream activity (with the US oil rig count hovering near multi-year lows), a limited number of drilled-but-uncompleted wells (DUCs) across all shale basins, a rise in natural declines, stronger shareholder returns (which are being rewarded via higher dividends and share buybacks), and a recent decline in crude prices.  

US crude and condensate supply, Mbd

Source: EIA

When it comes to the latter, break-even prices continue to remain well below current prices, with the average shale producer having a break-even price of between $55-65/bbl. Nevertheless, OPEC+ spare capacity continues to remain elevated and around multi-year highs, which has seen many producers take a slightly more cautious approach when allocating capital for new developments, a trend that will continue in 2025.  

The above-mentioned factors are expected to offset any upside that will come from a rise in efficiency gains (including higher initial production rates), which are expected to slow down gradually over 2025, as well as an expected decline in operational costs. Considering this, we estimate that US crude and condensate supply will average around 13.6 Mbd in 2025. Support for US crude supply over the next 9 months will come from the Gulf of Mexico, with Shell’s 100 kbd Whale project, as well as other projects, such as Chevron’s 75 kbd Ballymore (onstream in H1 2025), lifting regional medium density supplies.  

Want access to Insights on a regular basis?

Through unbiased, expert-driven research and news, you’ll receive valuable information on supply, demand, and market movements, enabling you to make informed trading and risk management decisions.

Unbiased. Precise. Essential.

Curious? Request access to Kpler Insight today.