The fall of the Assad regime in Syria, which could lead to more regional instability, along with China's Politburo shifting its monetary policy, may have seemed like a golden opportunity for the oil market.
Why? On the one hand, there is the risk of supply shortages due to rising tensions in the Middle East, and on the other hand, the potential for increased energy demand in China as the economy recovers momentum. .
However, neither WTI nor Brent rose, unlike the S&P 500 index. Traders seem to believe that Trump's decision to increase oil drilling could offset any shortfall in the market.
The problem is that with oil production costs in the Permian Basin hovering around $64 per barrel, US producers have little incentive to increase production and keep prices in an incredible range.
This was recently confirmed by Liam Mallon, Exxon's head of exploration and production. In other words, the president's promises to “drill, drill, drill” could run counter to the market's extreme rigors.
What about OPEC+?
Recently, cartel members delayed their plans to increase oil production by three months instead of just one month, as in November. However, the decision did not last long…
Traders don't seem to be worried, but if they are oil prices remain under pressureOPEC+ is likely to delay it again. This is because similar moves have so far not had a lasting impact.
The main reason is the continued decline in OPEC market share. For example, in 2016, the cartel produced 34 million barrels per day, but now it is down to only 27 million.
So, while OPEC + cuts production, US producers, along with countries like Brazil and Canada, step in quickly to fill the gap. Another risk is that the cartel could be broken up due to disagreements over production quotas.
For example, Sechin has asked for a two-fold increase in global oil production in Russia. If that happens, Saudi Arabia could respond by releasing even more capacity to the market.
What could support oil prices?
Tighter sanctions on Russia and Iran and worsening geopolitical tensions in the Middle East are factors the market is watching. However, they could eventually have a major impact on global oil supplies.
Another hope is that global oil demand will rise to 108 million barrels per day (+4%) by 2030, driven by consumption growth in China (+6% to 17.5 million b/d) and the -India (+24% to 6.95 million b/d) /d).
However, it is still uncertain whether these factors will tighten the market for or against it next year. What is clear is that 2025 will be very volatile, especially for the energy market.
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