Oil Markets Face Uncertainty Amid Changing Geopolitics
Predicting oil market trends is always challenging, but 2025 brings even more uncertainty. Major global elections are reshaping policies, and the energy landscape is shifting. One of the most significant changes is the return of U.S. President Donald Trump, whose policies are set to impact oil production, pricing, and global trade.
Trump’s Energy Strategy: More Oil, Lower Prices?
Since taking office in January, President Trump has focused on boosting U.S. oil production under his “drill, baby, drill” policy. He aims to ramp up production to “never seen before,” but this comes with a challenge—higher production needs strong oil prices, while lower prices benefit American consumers. Balancing these priorities will be crucial.
Trump also views oil as a geopolitical tool. He believes that lowering oil prices could force Russia to negotiate an end to the Ukraine war. At the World Economic Forum in Davos, he criticized OPEC for maintaining high prices and urged the group to take action. Currently, Brent crude oil is priced at around $70 per barrel.
Global Trade Tensions and Oil Markets
Beyond production policies, Trump’s trade and tariff strategies will influence oil markets. His aggressive economic measures, including tariffs on China, Mexico, and Canada, could trigger retaliation, impacting global trade and economic growth. If China’s economy slows further due to tariffs, it could reduce global oil demand.
In 2024, oil demand forecasts from key organizations varied significantly. OPEC projected demand growth of over 2.2 million barrels per day (mb/d), while the International Energy Agency (IEA) expected just over 900,000 mb/d. This gap created market uncertainty, affecting oil prices. For 2025, both organizations predict lower but steady demand growth, mainly driven by China and other non-OECD countries.
OPEC+, Production Cuts, and Market Balance
OPEC+ has been limiting oil output since 2022 to stabilize prices. Although some planned production increases were delayed in 2024, the group is set to revisit its strategy in April 2025. The IEA warns that even if OPEC+ continues restricting supply, global oil markets may still face a surplus due to rising production from non-OPEC+ countries, including the U.S., Brazil, and Canada.
U.S. Sanctions on Oil Producers
Trump has also hinted at imposing new sanctions on key oil-producing nations, particularly Russia and Iran. In a recent statement, he warned of “severe tariffs and sanctions” unless Russia ends the war in Ukraine. The U.S. has already imposed restrictions on Russian oil exports, targeting tankers and insurance providers involved in Russian, Iranian, and Venezuelan oil shipments.
If Trump revives his “maximum pressure” strategy on Iran, it could significantly reduce Iranian oil exports, potentially pushing oil prices higher. The U.S. Treasury Secretary recently stated that the administration aims to cut Iran’s oil exports to just 100,000 barrels per day—down from the current 1.5 million.
Also Read: Global Economy
Oil Price Scenarios for 2025
The future of oil prices depends on multiple factors:
- Unlikely Scenario: A sharp surge in oil demand significantly drives prices up.
- More Likely Scenario: Trade tensions slow economic growth, reducing oil demand and stabilising prices. However, if Trump’s sanctions succeed in limiting Russian and Iranian oil exports, prices could rise.
If OPEC+ releases more oil to balance the market, price increases may be short-lived. Ultimately, President Trump must balance the interests of American consumers (who want lower prices) and U.S. oil producers (who benefit from higher prices).
While volatility is expected, the global oil market may eventually stabilise as policies and economic forces adjust.
