OPEC+ cautious of renewed US oil output rise underneath Trump, sources say

By Anna Hirtenstein and Alex Lawler

LONDON (Reuters) – OPEC+ is cautious of a renewed rise in U.S. oil output when Donald Trump returns to the White Home, delegates from the group stated, as a result of extra U.S. oil would additional erode OPEC+ market share and hamper the producer group’s efforts to assist costs.

OPEC+ pumps about half of the world’s oil and earlier this month delayed a plan to boost output till April. The group prolonged a few of its provide cuts till the top of 2026 because of weak demand and booming manufacturing from the U.S. and another non-OPEC+ producers.

OPEC has a historical past of under-estimating U.S. output positive factors going again to the beginning of the shale oil increase, which has seen the US grow to be the world’s high oil producer. The USA now pumps a fifth of world provide.

Some delegates are extra bullish now on U.S. oil and say the explanation behind that is Trump. Following an election centred on the economic system and the price of dwelling, Trump’s transition staff put collectively a wide-ranging bundle to decontrol the power sector.

“I feel a return of Trump is sweet information for the oil trade, with presumably much less stringent environmental insurance policies,” a delegate from a U.S. ally OPEC+ member stated.

“However we may even see greater manufacturing in the US, which isn’t good for us.”

Vienna-based OPEC did not reply to a request for remark.

An extra rise in U.S. output would hinder plans by the Group of the Petroleum Exporting International locations and allies resembling Russia to start out elevating output from April 2025 with out risking a drop in costs. A drop in costs would damage OPEC+ international locations who depend on oil revenues.

The U.S. president-elect desires to boost output however for various causes, having campaigned on guarantees to deliver down power costs and inflation.

“This can be a doubtlessly tough dynamic for each side,” stated Richard Bronze, head of geopolitics at Power Features. “OPEC+ has confronted a giant problem from rising U.S. manufacturing, which has diminished the group’s affect.”

U.S. OUTPUT TO RISE IN 2025

OPEC+ is holding again 5.85 million barrels per day of output capability after a sequence of cuts since 2022. Within the 2022-2024 interval, complete U.S. oil output has risen 11% to 21.6 million bpd in response to OPEC’s personal figures.

Solely 11 years in the past, the US pumped about 10 million bpd. OPEC+’s output is the same as 48% of world provide, the bottom because it was fashioned in 2016 with a market share of over 55%, in response to Reuters calculations primarily based on Worldwide Power Company figures.

OPEC+ choices to cut back output in 2016 and 2020 helped the U.S. shale trade and made it a number one exporter, stated Igor Sechin, the pinnacle of Russia’s largest oil producer Rosneft, earlier this month.

One other OPEC+ supply stated Trump’s insurance policies might assist oil demand, which might profit the producer group, though the prospect of upper U.S. oil provide is a priority.

“The primary risk to OPEC+ is rising U.S. oil manufacturing underneath Trump, decreasing the nation’s dependence on imported oil and rising exports,” the supply stated.

In a report final week, OPEC predicted complete U.S. provide will rise by 2.3% subsequent yr and likewise minimize its forecast for world oil demand progress once more.

“They’re acknowledging that the U.S. might be taking an even bigger piece of the pie,” stated Bjarne Schieldrop, chief commodities analyst at SEB.

The IEA sees U.S. output rising by 3.5% subsequent yr, quicker than OPEC.

Some trade executives and analysts aren’t satisfied that U.S. provide might improve considerably underneath Trump. Shale producers are centered on their economics, generally known as capital self-discipline, and are anticipated to solely improve output if it will likely be worthwhile, in response to the pinnacle of Exxon (NYSE:XOM)’s upstream division.

This state of affairs turns into much less probably if costs drop. New oilfields take years to develop, so Trump’s pledges for permits to drill in new locations aren’t prone to yield new barrels any time quickly.  

“The U.S. has no spare capability,” stated Bob McNally, president at Rapidan Power Group and former White Home official. “How a lot the U.S. will drill relies upon extra on choices made in Vienna than in Washington.”