Oil prices have not soared following Israel's war in Gaza, Lebanon and its attacks on Iran, contrary to many predictions. Fears were mainly focused on Tehran, the world's fifth largest oil producer in 2023. But as the IDF has not struck the production infrastructure of its great regional enemy, the risk of a rise in prices seems to be receding.
“Even in the event of an attack on oil infrastructure, prices are expected to rise very little. The market being more sensitive to threats than to actions, it has already anticipated and integrated this risk. says Fredj Jawadi, professor of finance at the University of Lille.
Looking more closely at the price of a barrel of Brent (the benchmark barrel in Europe), the trend has been rather downward for a year. It stood at $93.5 per barrel in September 2023, on the eve of the October 7 attack and then the Israeli escalation, compared to around $75 at the beginning of November.
A gloomy request
“The OPEC+ producing countries have learned to anticipate geopolitical shocks and now have a replacement capacity estimated at around six million barrels per day,” specifies Fredj Jawadi.
In short: they could easily increase their production to absorb a shock. This would therefore make it possible to compensate for a possible default by Iran, whose production reached 4.6 million barrels per day in 2023.
“Oil prices vary mainly depending on supply and demand, explains Valérie Mignon, economist at Cépii. However, we are in a situation where supply is very high while demand tends to slow down, particularly due to China's weak growth prospects. »
Beijing is the second largest demand for oil in the world. However, Chinese demand decreased in the third quarter of 2024
Beijing is in fact the second largest demand for oil in the world, behind the United States, which is practically self-sufficient. However, Chinese demand decreased by 0.3 million barrels per day in the third quarter of 2024 compared to the previous year.
The World Bank's semi-annual report on the commodities market, published in October, attributes this decline to “moderate growth in industrial production, rapid growth in electric and hybrid vehicles, and the increasing prevalence of trucks powered by liquefied natural gas (LNG)”.
These prospects of gloomy demand are pushing prices down, which does not help the OPEC+ countries. On November 3, eight of them announced they were extending their voluntary production cuts, contrary to what they had planned a few months ago. The reduction in their production of 2.2 million barrels per day will last at least until the end of December.
Short-term decline, medium-term rise?
Following this announcement, the price of a barrel of Brent increased very slightly. But the lasting effect of this decision on prices is expected to be limited. Because if these countries still represent 40% of global oil production, they must face growing competition from the United States and – to a lesser extent – Canada, which now represent 20.1% and 5.9% respectively. of world production. An increasing share.
In 2025, the return of Donald Trump at the head of the leading oil producing country could therefore shake up prices. He promised to relaunch the trade war with China, by sharply increasing customs duties, which would probably reduce this country's growth and therefore oil demand.
During his campaign, Donald Trump repeated « Drill, baby, drill ! » (“Fore, baby, drill!”), marking his support for the production of black gold
Furthermore, Donald Trump also intends to free himself from policies to combat climate change and the Paris agreement. During his campaign, he repeated « Drill, baby, drill ! » (“Drill, baby, drill!”), marking its support for the intensification of oil drilling and more broadly for the production of black gold.
Enough to have a downward impact on prices via an increase in production. Should we conclude that the protectionism of the future American president would help reduce the price of a barrel of oil in the coming years?
The answer is not so obvious, because at the same time, Donald Trump's very favorable speech on fossil fuels should lead to an increase in demand in the United States, and indirectly throughout the world. So in the medium or long term, Fredj Jawadi rather predicts an increase in oil prices after the Republican's return to power.
For its part, the World Bank, in its October report published before the elections in the United States, forecasts that the fall in oil prices will continue next year and then the following, and anticipates an average price of a barrel of Brent to 73 dollars in 2025, compared to 80 on average this year.
