With each week that passes, the presidential race takes an unprecedented turn. What has captivated most of history with a less-than-exciting race between two parties has elevated into ground-shaking moments like an assignation attempt on Former President Trump and then President Biden’s announcement to forego his bid as the Democratic nominee. Although a call to tone down the rhetoric was waged, neither the Democrats nor Republicans have followed through. As each piece to the 2024 election pans out, it seems to defy the normal or what is typically expected, and the same unexpected happenings of the election appear to have overrun what is usually expected in other areas, such as the predicted candidate who would be best for the future of the fossil fuel industry.
While Mr. Trump rallies his supporters and pledges his commitment to boosting oil and gas activity to achieve energy independence, Golden Sachs recently countered that notion with an analysis indicating it might take more work to increase oil supply levels next year. The global financial institution indicated that with low petroleum reserve stocks paired with regulatory easing, only a long-run boost in supply could occur.
Following the release of U.S. economic data that surpassed estimates by analysts, Friday witnessed an increase in oil prices. As a result, investor expectations climbed with the expectation for a rise in crude oil demand from the globe’s largest energy consumer. Goldman Sachs estimates Brent prices will range between $75 and $90 per barrel if the GDP carries trend-like growth next year. Additionally, its estimates depend on OPEC’s continuation of balancing the market.
Although uncertainty plagues the geopolitical arena, tariffs on U.S. crude are not expected. Should the U.S. levy a 10 percent tariff in an alternate scenario, Goldman Sachs analysts predict an $11 per barrel hit. Tariffs could also drop oil prices by $19 per barrel if the Federal Reserve continues to delay any reduction in interest rates past 2025.
With activity bolstering throughout the North American Shale, an increase in supply seems unfathomable to some. Although the Permian Basin has continually made oil and gas news as a hotbed of activity, Goldman Sachs is headed for slower growth but will remain robust.
“The annual average production growth in maturing Permian basin is likely to gradually decline from an exceptionally strong 520,000 barrels per day in 2023 to 340,000 barrels per day this year, and to a still robust 27,000 barrels per day in 2026,” wrote Yulia Grigsby, an energy economist in Goldman Sachs Research.
Regardless of whether Permian oil production slows, price forecasting of $79 per barrel WTI crude this year and $76 next year will maintain elevated levels of efficiency in drilling and completion operations. This level of forecasting surpasses Goldman Sachs’ breakeven price of Permian oil at $74 per barrel.
Citi offered input on the future of the oil supply state with a research note indicating that if Mr. Trump regains the president’s office, a net bearish impact could be expected on oil prices due to oil-friendly policies and regulations while also attempting to influence OPEC in increasing its supply to the market.
Citi analysts wrote, “Trump could roll back environmental policies, though broadly overturning the (Inflation Reduction Act) looks unlikely due to its positive impacts in red states.”
