Washington: Oil prices are on the decline due to new policies under US President Donald Trump aimed at increasing fossil fuel production. However, experts predict that these regulatory changes targeting the sector will have a limited impact on the broader oil market.
According to Anadolu Agency, upon taking office, Trump signed several executive orders, including a National Energy Emergency declaration to boost the country's oil and gas production. He announced plans to withdraw the US from the Paris climate agreement and reverse drilling bans in US waters imposed during the former Joe Biden administration. Additionally, Trump moved forward with decisions to unlock Alaska's natural resources.
Trump also continued his tariff threats against major trade partners, including Mexico, Canada, China, and the EU, raising concerns over global trade tensions. He reiterated that any attempt by BRICS nations to replace the US dollar would result in a 100% tariff on those countries. Amidst these developments, Brent crude posted a six-day losing streak, closing at $77.54 for the week ending Jan. 24.
Uncertainty over Trump's policies toward key oil suppliers such as Russia, Iran, and Venezuela signals ongoing risk in the market. On Jan. 10, the US Department of the Treasury added Gazprom Neft, Surgutneftegas, and other Russia-based oilfield service providers to its sanctions list. This led to Brent crude reaching its highest price in three months.
Jorge Leon, a senior vice president at Rystad Energy, told Anadolu that Trump's policies aimed at lowering oil prices might not align with market dynamics. He emphasized that capital discipline and shareholder returns will take priority, and the true effects of deregulation might not be seen until next year. Leon suggested that policies such as pressure on Iran and Venezuela, tariffs on Mexican and Canadian oil, and the end of EV mandates could drive oil prices higher.
According to Ajay Parmar from Independent Commodity Intelligence Services, Trump's unpredictable policies are likely to bring more volatility to the oil markets. However, the regulatory changes' impact on the sector will be limited. Parmar noted that if Trump lifts sanctions on Russia, oil prices could drop below $70, while the reimposition of sanctions on Iran could reduce Iran's oil supply by up to 1 million barrels per day.
Parmar further explained that Trump's strategy to keep oil prices below $80 per barrel may not significantly influence the sector. Major players like ExxonMobil and Chevron have a significant presence in the US shale patch, focusing on long-term, stable returns rather than short-term legislative shifts and price fluctuations. Thus, Trump's "drill, baby, drill" strategy is unlikely to materially impact oil markets.