Donald Trump has been vocal about his desire for lower energy prices. Interestingly, he might see this wish come true soon after he steps into office on January 20, taking the helm of the world’s biggest oil producer—not due to any initiatives he might launch, but because of market dynamics already in play. Experts are predicting a drop in oil prices next year, primarily driven by a glut in supply. The U.S. is churning out record-breaking amounts of crude, while in China, the world’s leading oil importer, demand isn’t keeping up as its post-pandemic economic momentum wanes. This bearish mood has gripped the energy market, causing U.S. crude oil prices to slip by about 1% this year, with global benchmark Brent dipping more than 4%, as traders worry about supply surpassing demand.
“Trump could benefit from lower oil prices more due to market fundamentals than his own actions,” explained Bob McNally, president of Rapidan Energy Group. In a strategic move to maintain prices, Saudi Arabia, Russia, and other members of OPEC+ have postponed any plans to ramp up production until April. The International Energy Agency forecasts a surplus of 950,000 barrels a day by 2025, even if OPEC+ holds off on unleashing its reserve barrels into the market. Bank of America and RBC Capital Markets anticipate Brent to hover around $65 per barrel by 2025, with U.S. crude slightly lower at $61—both figures over $8 down from current prices.
While some analysts retain a glimmer of optimism, predicting modest changes, few anticipate a surge for oil in the coming year. UBS, for example, forecasts that prices will remain relatively stable in 2025, with Brent averaging around $80 per barrel due to stronger demand and a smaller surplus than others predict. Ironically, Trump stands as a potential wildcard. Though he might prefer lower prices, they could climb if he decides to crack down on oil exports from Iran and Venezuela, posited Jorge Leon, a geopolitical analyst at Rystad Energy. Moreover, Trump’s suggested tariffs might not impact global demand until 2026. “Trump is somewhat bullish for 2025 and bearish for 2026,” Leon commented.
Turning the spotlight to U.S. production, Trump’s aim for increased production might prove challenging in the near term if oil prices stagnate. The U.S. is on course to reach a historic output of 13.2 million barrels per day this year and could escalate to 13.5 million bpd by 2025, as per the Department of Energy’s forecasts. Nonetheless, production might stall or even dip if U.S. crude prices plateau, according to a recent UBS report. Some shale producers need prices to climb to $70 per barrel to drill profitably, the bank noted.
In such a scenario of tepid oil prices, UBS sees Exxon Mobil and Chevron as the best-positioned entities to reward shareholders, thanks to their robust balance sheets and unique resources. Exxon has surged about 8% this year, outpacing the broader energy sector and especially Chevron following its acquisition of Pioneer Natural Resources. UBS anticipates Chevron gaining an edge over Exxon in 2025 with potential growth drivers on the horizon. Chevron may commence production in Kazakhstan during the first quarter, hit its goal of 1 million bpd in the Permian by mid-year, and complete its acquisition of Hess Corporation by the third quarter.
The two oil giants are also diverging in their investment strategies for 2025, an indication they’ll continue to navigate market conditions independently of any directives from the incoming administration. Chevron plans to slash capital expenditures by $2 billion, focusing on cost-cutting and profit-boosting, while Exxon is increasing its capital spending by as much as $3 billion, from $26 billion this year to a range between $27 billion and $29 billion in 2025. “Chevron is hesitating to ramp up capital spending, whereas Exxon remains optimistic about the oil market,” remarked Bob Yawger, director of energy futures at Mizuho Securities.
UBS has set a price target of $195 for Chevron, suggesting a roughly 30% rise from Tuesday’s close of $148.11 per share. For Exxon, they project a price target of $149, indicating a potential 37% rise from its recent closing price of $108.01.
