One thing President-elect Donald Trump can probably count on next year is falling oil prices, thanks to growing global supply.
“Demand is not the primary concern as global oil demand growth is expected to slow from 1.3 million barrels per day this year to 1.1 mbd next year … Instead, the real challenge lies in the excess supply,” Natasha Kaneva, head of the Global Commodities Strategy team at JPMorgan, wrote in a recent note.
Kaneva and her team predict Brent (BZ=F), the international benchmark, which is on track to average roughly $80 for 2024, will tumble to an average of $73 in 2025.
The analysts point to incoming supply from large-scale offshore developments in Brazil, Guyana, Senegal, and Norway.
Meanwhile, BofA analysis shows prices could drop to an average of $65 per barrel in 2025, particularly if the Organization of Petroleum Exporting Countries (OPEC) decides to bring barrels back onto the market, a move the oil alliance has repeatedly delayed this year.
“Oil is not going to be in short supply, so we keep more of a bearish stance on oil [in 2025],” Francisco Blanch, head of Bank of America’s global commodities and derivatives research, said earlier this month.
Wall Street’s forecasts bode well for Trump’s intention to lower the price of energy through deregulation, among other things. “We’ll soon unleash American energy. And this will be done at levels not seen before, issuing quick approvals for pipelines, drilling, and other infrastructure,” Trump said at a recent press conference.
The US already provides roughly 20% of the world’s oil, more than any other country.
Growing domestic and foreign supply will likely cap any upward price shocks.
“There’s a much much larger risk of a big price drop to $50 or $60 than there is to something like the $80+ range,” Tom Kloza, OPIS global head of energy analysis told Yahoo Finance. “It would take something on the order of the Russian invasion of Ukraine or a wider mid-Eastern war to really send prices back up to the 2022 or 2023 highs.”
Some analysts point out crude futures could move higher if Trump imposes US sanctions against Iran or Venezuela. But JPMorgan’s Kaneva believes the incoming president will ultimately opt to keep oil prices low to avoid inflation catalysts.
“Any policies that might raise oil price will likely take a backseat to Trump’s key objective of maintaining low energy prices,” she wrote to clients.
Despite the downtrend in prices, the impact on energy costs will likely vary from Trump’s promises during his campaign.