Citigroup forecasts a potential decline in oil prices during Donald Trump's possible second presidential term, anticipating downward pressure on oil prices, especially Brent crude, which might average around $60 per barrel. This is attributed to expected changes in trade policies and increased oil supply. The bank suggests that Trump's influence on OPEC+ could prompt the organization to reduce production more swiftly, alleviate geopolitical tensions, and release some offshore oil back into the market.
The bank also notes that Trump's policies might benefit the oil exploration and production sector through potential tax incentives, reversing measures from the Biden era, such as increased royalties, minimum bid costs, and federal land lease rates. However, these policies could have complex impacts on global economic growth, particularly affecting Europe and China due to potential trade policy implications, which might further weaken global oil demand growth. Citigroup currently anticipates a global oil demand growth of 900,000 barrels per day next year, which may face downside risks.
Despite a supportive agenda for the oil and gas industry, Citigroup believes the direct impact on the physical oil market might be limited. Following Trump's re-election, Brent crude futures fell by 61 cents to $74.92 per barrel, a 0.8% drop, while U.S. WTI crude futures declined by 30 cents to $71.69 per barrel, a 0.4% drop. The re-election led to a significant sell-off, with oil prices dropping over $2 per barrel in early trading as the dollar surged to its highest level since September 2022.
