Citi Predicts Trump’s Second Term Could Lower Oil Prices Through 2025
In a recent forecast, Citi has predicted that U.S. President-elect Donald Trump’s second term could potentially lead to a decrease in oil prices, with Brent crude expected to average at $60 per barrel by 2025. This is primarily due to the possibility of trade tariffs and an increase in oil supply.
The bank highlights that Trump’s influence on OPEC+ may result in the producer group easing production cuts more quickly, which could also alleviate geopolitical tensions and release more oil into the market. Additionally, Trump’s policies could benefit the industry by offering tax incentives for capital investment in exploration and production, as well as reversing certain policies implemented during the Biden era.
However, Citi also notes that Trump’s policies could have mixed implications for global economic growth, especially negative effects on Europe and China due to potential trade tariffs. This could lead to a decrease in global oil demand growth, posing risks to Citi’s current expectations of 0.9 million barrels per day for the next year.
Despite the potential positives for the oil and gas industry, Citi believes that the immediate impact on physical oil markets is likely to be limited. Following Trump’s reelection, oil futures settled lower, with Brent crude down 61 cents to $74.92 per barrel and U.S. WTI crude falling 30 cents to $71.69.
The market saw a significant sell-off in response to Trump’s victory, pushing oil prices down by over $2 per barrel as the U.S. dollar strengthened to its highest level since September 2022.
Analysis:
Citi’s forecast suggests that Trump’s second term could lead to lower oil prices through 2025, primarily due to potential trade tariffs and increased oil supply. While this may benefit the oil and gas industry in some ways, it could also have negative implications for global economic growth, particularly in Europe and China. This could result in a decrease in global oil demand growth, posing risks to current expectations. Despite these potential impacts, the immediate effect on physical oil markets is expected to be limited.