Crude's Steady Year

By Clyde Russell, Asia Commodities and Energy Columnist

Hello Power Up readers! Crude oil prices are ending 2025 only slightly weaker that where they were at the beginning of 2024. Global benchmark Brent crude futures settled at $73.99 a barrel on Wednesday, while West Texas Intermediate contracts ended at $70.58. Brent finished the first trading day of 2024 at $75.89, a mere 2.6% higher than where it is now, while WTI was actually cheaper by 20 cents at the start of the year. While there was a rally until April and then a gradual downtrend, perhaps the OPEC+ group has been more successful at keeping the market stable than many would give it credit for, especially given the geopolitical tensions and disappointing China demand. 

An OPEC flag is seen on the day of OPEC+ meeting in Vienna in Vienna, Austria October 5, 2022. REUTERS/Lisa Leutner/File Photo 

OPEC+ is concerned that U.S. crude oil output will rise when Donald Trump returns to the White House in 2025, according to delegates from the group, which brings together the Organization of the Petroleum Exporting Countries and allies including Russia. If Trump is successful in his plans to get U.S. producers to pump more, it would further erode OPEC+'s market share and hamper the exporter group's efforts to support prices.

OPEC+ pumps about half of the world's oil and earlier this month delayed a plan to raise output until April. The group extended some of its supply cuts until the end of 2026 due to weak demand and booming production from the U.S. and some other non-OPEC+ producers.

The United States now pumps a fifth of world oil supply, and some OPEC+ delegates are more bullish because of Trump. Following an election centred on the economy and the cost of living, Trump's transition team put together a wide-ranging package to deregulate the energy sector.

It's not just OPEC+ that is worried about Trump's second term. Commodity markets are bracing themselves for the fallout from Trump's threatened tariff war. The president-elect's array of threatened tariffs, including up to 60% on China and 20% on all other nations, could derail global economic growth, force a realignment of trade flows, boost inflation and lead to tighter monetary policy.

But it's equally possible that none of these things will occur if the tariff threats turn out to be nothing more than negotiating tactics. In this scenario, Trump may forgo any damaging policy actions if he believes he has scored enough "wins" in his dealings with other countries.

What China does may be key, with the world's biggest importer of crude and host of metals having tools available to deal with the consequences of any tariff war. It could hurt the U.S. economy by disrupting supply chains, sell a massive amount of U.S. Treasuries, devalue its own currency, boost stimulus spending and advance its leadership in renewable energy technologies and installations.

China may also seek to compensate for any loss of access to U.S. markets by boosting trade and investment in Europe and what's broadly termed the "global south". Again, it's far from certain that these tactics will be employed, with much depending on what actual policies Trump's administration puts in place once he is sworn in on Jan. 20. 

Iran's Revolutionary Guards have tightened their grip on the country's oil industry and control up to half the exports that generate most of Tehran's revenue and fund its proxies across the Middle East, according to Western officials, security sources and Iranian insiders.

U.S. liquefied natural gas exports are on track to climb to new highs in 2024, as record domestic natural gas production spurred the 10th straight year of volume growth in the lucrative LNG export sector.

North American graphite miners asked the U.S. government on Wednesday to impose a tariff as high as 920% on Chinese suppliers of the battery metal in order to counter what they describe as Beijing's "malicious trade practices."

About half of the United States is at increased risk of power supply shortfalls in the next decade that could lead to outages and electricity conservation measures, according to the North American Electric Reliability Corporation.

Italy's power producers are set to generate more electricity from clean power sources than from fossil fuels this year for the first time, marking a major energy transition milestone for Europe's fourth-largest economy.

Power Up is sent twice weekly. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.

Want to stop receiving this email? Unsubscribe here. To manage which newsletters you're signed up for, click here.

Terms & Conditions and Privacy Statement