Trump’s Oil Plans Meet Market Glut in 2025
- Dec 29, 2024
At the current state of affairs, supply is expected to exceed demand by around 1 million barrels per day next year.
Non-OPEC+ supply, including from the United States, will continue to grow, analysts say.
Trump's promised deregulation in the oil and gas industry with faster permitting could hit a wall of continuously growing global supply.
President-elect Donald Trump’s friendly oil policies could boost U.S. crude production beyond the currently estimated growth.
However, Trump’s vow to “drill, baby, drill” and the promised deregulation in the oil and gas industry with faster permitting could hit a wall of continuously growing global supply. This higher production from non-OPEC+ producers is set to tilt the market into a large surplus in 2025, even if OPEC+ keeps its current commitment to begin bringing back supply from April, analysts and forecasters say.
At the current state of affairs, supply is expected to exceed demand by around 1 million barrels per day (bpd) next year. But market observers know that geopolitics will surely play a role in oil prices going forward. And they concur that the biggest wildcard is Trump’s policy toward Iran, Venezuela, and Russia, as well as potential tariff impacts on energy prices in America, its economy, and global economic growth.
On the supply side, expectations are bearish.
Non-OPEC+ supply, including from the United States, will continue to grow, analysts say. The expected increase is set to offset a large part of the ongoing OPEC+ production cuts. With more than 2 million bpd of OPEC+ cuts, the global oil market has a comfortable spare capacity of well over 5 million bpd, concentrated in some of OPEC’s biggest producers – Saudi Arabia, Iraq, the UAE, and Kuwait.
As a result, “The oil market is not particularly concerned about supply over the next few years, especially in an environment where Chinese oil demand growth has disappointed, especially in 2024,” Andy Lipow, president at Lipow Oil Associates, told Yahoo Finance this week.
Estimates of China’s oil demand growth have been constantly downgraded throughout the year— from 700,000 bpd growth for 2024 expected in January to just 180,000 bpd growth seen in December, Lipow noted.
Related: U.S. Oil Production Shattered Records Again in 2024
Modest demand growth in 2025 and a strong supply increase from non-OPEC+ producers led by the U.S., Brazil, Guyana, and Argentina are expected to keep oil prices next year at around the current levels of Brent Crude in the low $70s and WTI Crude prices hovering around the $70 per barrel mark, most analysts and investment banks say at the end of 2024.
The oil market will see a surplus next year even if OPEC+ begins to unwind its production cuts in April 2025 as currently planned, they reckon.
In early December, the OPEC+ group decided to delay the start of the easing of the 2.2 million bpd cuts to April 2025, from January 2025. The group also extended the period in which it would unwind all these cuts into the following year through September 2026.
Due to the OPEC+ decision, next year’s surplus may not be as large as previously feared, but a surplus we will see, banks say.
Even if OPEC+ keeps its oil production as-is for the whole of 2025, there would still be a surplus in supply of 950,000 bpd next year, the International Energy Agency (IEA) said in its monthly report for December.
If OPEC+ does begin unwinding the voluntary cuts from the end of March 2025, this glut will swell to 1.4 million bpd, according to the agency.
All these forecasts could be quickly upended by President Trump’s tariff policies and geopolitical choices.
Stricter U.S. sanctions against Iran under Donald Trump and geopolitical tensions would be bullish catalysts for oil prices. But fundamentals currently point to supply outstripping demand, which is a downside risk for oil prices in 2025.
“Going short now you have to be brave,” Frederic Lasserre, Global Head of Research & Analysis at commodity trader Gunvor, told Bloomberg last week.
“Yes, fundamentals are not so great, but market participants know that geopolitics will play a role next year for sure.”
By Tsvetana Paraskova for Oilprice.com
Trump's Tariff Threats Cast Shadow Over European Auto Industry
By RFE/RL staff - Dec 27, 2024
Trump's proposed tariffs on Chinese, Canadian, and Mexican goods could trigger trade wars and severely impact European automakers.
Central and Eastern European countries that rely heavily on car manufacturing would be particularly hard hit by these tariffs.
The German auto industry, Europe's largest exporter of passenger cars to the United States, is also highly vulnerable to Trump's tariff threats.
As Donald Trump prepares to take office on January 20, Europe’s already battered car industry is bracing for additional headwinds amid the threat of new tariffs from the incoming U.S. president.
Trump has pledged to impose steep new tariffs on goods coming from China, Canada, and Mexico in one of his first acts in office, a promise that could ignite trade wars.
That is bad news for European automakers who have already seen sales and manufacturing decline in top markets like the United States and China.
The potential tariffs would be felt hard not only by leading European car brands like Volkswagen, Volvo, and Stellantis -- the conglomerate that produces Fiat, Chrysler, and Citroen -- but also for the Central and Eastern European countries whose economies rely heavily on making them.
Toma Savic, a former director at Zastava, a Serbian international car manufacturer that was shuttered in 2008, said the tariffs would be a particularly hard blow for operations in the Balkan country.
"This inevitably would lead to the shrinking of production in Europe and mass layoffs," he said.
Zastava later became Fiat Chrysler Automobiles Serbia, which is owned by Stellantis.
Based in Kragujevac in central Serbia, Fiat Chrysler Automobiles Serbia has already been struggling to recuperate its foothold in the European auto industry prior to the breakup of Yugoslavia in the early 1990s when it assembled 200,000 cars annually and exported them to 26 countries.
Germany’s auto industry is also likely to be highly vulnerable to Trump’s promised tariffs, especially given that Europe’s biggest economy is by far the region’s largest exporter of passenger cars to the United States.
European and American carmakers could lose up to 17 percent of their combined annual core profits if the United States imposes import tariffs on Europe, Mexico, and Canada, according to some estimates.
Trump’s Tariff Vision
While Europe was not specifically mentioned in Trump’s first tariff announcement in late November, he took aim at the European Union while on the campaign trail earlier this year and accused European partners of unfair trade practices and stealing American manufacturing jobs.
"They don’t take our cars, they don’t take our farm products, don’t take anything,” Trump said on the campaign trail in October. “They are going to have to pay a big price.”
The U.S. market is the main destination for European passenger cars. Exports amounted to 42.5 billion dollars in 2023, according to Statista, a German online platform that specializes in data gathering and visualization.
In comparison, the value of U.S. vehicles imported to the EU was around 7.8 billion dollars during the same period.
Trump said on the campaign trail in September that he wants German automakers to become "American car companies” and “build their plants here.”
He added that he was prepared to offer low taxes and energy costs to draw more companies to set up manufacturing inside the United States.
In 2016, German carmakers avoided 35 percent tariffs floated by Trump by investing in more production in the United States.
But Trump's new proposed tariffs could make it more costly for European automakers to set up U.S.-based factories.
A Make Or Break Moment
The threat of new tariffs will add to already growing pressures facing the European auto industry as it looks to compete for the future electric vehicle (EV) market that is dominated by Chinese manufacturers.
Earlier this year, the EU imposed duties of up to 35 percent for EVs from China saying that the “unfairly subsidized” cars have given them a market foothold.
Added to this, car sales for EVs across the EU have dipped downward and some governments have repealed subsidies meant to incentivize consumers to buy the cars.
The rise of Chinese companies, such as EV-leader BYD, has also seen Western car brands lose market share inside China at a steady rate, with Volkswagen in particular grappling with declining sales.
Between tougher competition from China, declining sales at home, and new pressure from Trump, many European automakers are facing a bleak outlook.
Back in Kragujevac, Fiat Chrysler Automobiles Serbia is grappling with weak demand, including several fully electric products delayed entirely or produced at tumbling rates.
Jugoslav Ristic, a long-time union official in the car industry in Serbia, said the setbacks are a result of “customs wars and unfavorable business conditions.”
There is also concern that the industry could be further hit by a trade spat if Brussels responds to possible U.S. tariffs. Such an event could increase costs for consumers in both the United States and Europe and particularly hit Germany, the continent’s car behemoth.
The German Economic Institute predicts that if Trump imposes 20 percent tariffs on the EU it could cost the German economy up to 192.5 billion over four years.
Those costs would also have ripple effects in the parts of Central and Eastern Europe that are dependent on car manufacturing.
By RFE/RL
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