Oil prices hit as Trump signals increasing support for more drilling

The vocal support of President-Elect Donald Trump for more drilling in the US has contributed to volatile oil prices, with crude oil prices falling 4.83% this week to $68.4 per barrel at the time of writing. 

Brent crude oil prices dropped 4.32% over the past week, trading at $72.2 per barrel on Tuesday morning. Both oil prices slightly recovered later.

Trump’s focus on more drilling has led to increased expectations of higher oil production by the US in the coming months, which in turn, has led to lower oil prices. 

China’s recently released stimulus package of 10 trillion yuan (€1.30tn) has also been disappointing, with analysts concerned that it may not be enough to encourage economic growth. This in turn, has increased concerns about slumping oil demand from China in the near future. 

OPEC+ has also warned that non-OPEC+ countries are likely to increase their oil production in 2025, which could also cause further oversupply. 

According to OPEC+ forecasts, these countries are expected to hike production by 1.3 million barrels per day. The US Energy Information Administration (IEA) also expects non-OPEC+ countries to raise their oil production by 1.4 million barrels per day next year. 

OPEC+ is also expected to release its monthly report for November later on Tuesday. 

Trump promises to make drilling easier in the US

Trump has already made his strong support for oil and gas clear, by promising to make it easier for companies to get drilling leases, as well as build the required energy infrastructure. 

Other policies include potentially allowing companies to export more natural gas abroad, as well as increase drilling on federal land.

In contrast, the Biden administration has implemented higher bond requirements and royalty payments for drilling on federal land, while also decreasing the number of federal land leases sold. 

Trump has also said that energy bills would be slashed by at least half within 12 months of him being re-elected, however, details on how exactly this would be done have not yet been revealed.

Although these promises have been welcomed by oil and energy companies, there have also been increased warnings about profits and oil prices suffering in the short-term, mainly because of possible oversupply if drilling rules are eased.  

Trump is also likely to reverse President Biden’s halt on export approvals for  liquefied natural gas (LNG), which is expected to significantly help reduce uncertainties about the long-term supply of LNG.