Geopolitical situations add volatility to black gold prices, which have been moving since mid-October in a range between $66/b -$72/b (dollar per barrel) on the near term of WTI (West Texas Intermediate). ). Among the elements of pressure, the election of Donald Trump is causing, among other things, the rebound of the dollar index, which marks a one-year high, drastically weighing on oil prices. The Trump administration also wants to promote American oil production, which has already been close to records for several months.
Furthermore, Trump's announcement to impose 25% import taxes on Canada and Mexico is supporting the market. The United States indeed imports a significant volume of crude oil from Canada, and a reduction in these flows would increase American energy costs. Finally, another subject of uncertainty, the taxes imposed by the United States on Iran and Venezuela. With a peak of 4.3 million barrels per day (Mb/d) of combined production from the two countries, the United States could take advantage of the current tension to strengthen sanctions, and thus reduce overall supply.
The situation in the Middle East, a source of volatility
Since the offensive perpetrated on October 7, 2023 by Hamas on Israel and the response launched in retaliation on Gaza, the oil market has been on alert. Remember that the first oil shock of 1973 was born from a conflict between Israel and its neighbors while the second in 1979 from the Iranian revolution. However, Iran, the main supporter of Hamas, is in the sights of Israel and the United States.
With each wave of missile launches between Israel and Iran over the past year, oil prices have skyrocketed. They fall each time quite quickly, in the absence of military escalation or blockage by Iran of the Strait of Hormuz, the exit from the Persian Gulf through which 21% of daily world oil consumption passes. A greater or lesser risk premium depending on current events in the region therefore supports the market. The dismissal of the power in place in Syria, another protégé of Iran, is the latest episode to date.
OPEC supporting the market
However, longer-term fundamentals limit the increase. In a gloomy economic context, the outlook for global demand growth is regularly revised downwards, in the face of abundant supply. In this context, the members of OPEC, the main exporters in the Middle East of which Saudi Arabia is the main player, play the role of price regulator. For good reason, forecasts of non-OPEC production growth (Canada, Mexico, USA, Kazakhstan, etc.) of more than 5 Mb/d between 2024 and 2028 could exceed overall growth in demand, and thus induce a balance sheet surplus. Faced with this, OPEC + (including Russia) decided to limit this risk by postponing the gradual return of production of around 2.5 Mb/d by three months. Thus the voluntary reduction in production by OPEC + members will be extended to April 2025.
Caroline Bournand, Argus Media
