The policy of the administration of the new US President Donald Trump is unlikely to be able to drastically destabilize the situation on the world oil market, despite public statements about increasing oil production.
Trump, speaking on Monday at a rally in front of his supporters at the Capital One sports and concert complex in Washington, said that the US administration will take measures to increase hydrocarbon production in the country. In addition, the US president announced the introduction of a state of emergency in the energy sector to stimulate oil and gas production. Reuters reported that Trump also reversed the decision of former President Joe Biden to allow the transition to electric vehicles.
Analysts note that they do not expect a sharp destabilization of the oil market, despite the activity of Trump's statements. “Most likely, pressure on the market will be applied situationally to ensure a favorable contractual position on international issues and maintain a balance between comfortable fuel prices and the profitability of production in the United States“, they explain.
At the same time, they admit that the United States is indeed able to increase oil production, but will not be able to maintain it for a long time. “The price of such an increase could be high - a sharp decline in production will begin due to the geology of the Permian Basin (one of the largest oil-producing regions in the US), as well as bankruptcies of small companies with falling prices, where the cost of production is 60-65 USD per barrel“, he adds.
At the same time, experts consider Trump's thesis about the removal of support for electric transport interesting, which, in their opinion, may, on the contrary, strengthen oil prices. “This year we still expect Brent in the range of 65-85 USD per barrel“, they note.
For now, the issue of increasing oil production in the US is limited only to slogans that are not related to the announced plans of the companies. Experts call them “personal opinion of the US president“. At the same time, they recall that oil production in the United States has, of course, increased significantly over the past 13 years - from 5-6 million barrels per day to over 13 million barrels per day. “At the same time, the volume of oil demand from the United States is about 20 million barrels per day“, they say.
The United States will not be able to satisfy its oil needs by increasing production. The growth in production will be driven by light grades of oil, which are mainly exported, while oil refining in the United States is focused on medium and heavy grades. In this case, it is necessary to modernize US refineries in order to use lighter grades produced in the country. But plant owners and representatives of private business have not yet announced such plans.
“From all of the above, a simple conclusion can be drawn. If the US increases oil production, then, first of all, this will happen because of the types that will be exported. Can they start drilling more and producing more? They can. Can they satisfy their needs with this oil? They can, but this will require such efforts that no one will make yet,“, experts conclude.