Crude in Contango While Trump’s Energy Secretary Pick Shapes Sentiment for 2025

Crude in Contango While Trump's Energy Secretary Pick Shapes Sentiment for 2025

Oil prices slipped on Tuesday as Norway's Johan Sverdrup oilfield resumed production following a power outage, reversing part of Monday's 3% price surge. U.S. West Texas Intermediate (WTI) crude futures fell 14 cents to $69.02/bbl, pressured further by a stronger U.S. dollar, which increases oil costs for other currency holders. U.S. crude also flipped into contango for the first time since February, signaling eased supply concerns despite recent production disruptions. Monday's $2 per barrel price rise, driven by outages and a weaker dollar, saw a partial reversal in today's trading as market caution grew ahead of the December WTI futures expiry.

Offsetting the price drop was reduced output from Kazakhstan's Tengiz field, where repairs have cut production by 28%- 30% until Saturday. Geopolitical tensions also caused upward pressure following U.S. President Biden's decision to allow Ukraine to use U.S.-made weapons for strikes deep into Russia. This marked a significant shift in U.S. policy, prompting warnings from the Kremlin of potential NATO confrontation risks.

Markets are closely monitoring the Russia-Ukraine conflict after escalations raised fears of potential attacks on Russian energy infrastructure, which could disrupt global oil supplies. While some short-term crude forecasts have been raised, consensus points to a supply surplus by 2025. The next four weeks are historically challenging for crude and gasoline futures, leaving the market at a critical juncture as geopolitical and supply factors continue to shape sentiment.

Chris Wright's selection as U.S. Energy Secretary under President-elect Donald Trump is poised to impact oil and gas prices, particularly as it signals a strong focus on maximizing domestic fossil fuel production. Wright, a veteran of the oil industry and CEO of Liberty Energy, is expected to advocate for increased U.S. oil and gas output, which could create downward pressure on global prices by adding to supply.

If the U.S. ramps up production under Wright's leadership, it may challenge OPEC+ efforts to manage market balance through production cuts. Some predictions show that higher U.S. output could undermine OPEC's influence, potentially leading to a more competitive and price-sensitive global oil market. For instance, increased shale production, where Wright has expertise, could exacerbate oversupply conditions, especially as global demand growth slows in key regions like China.

OPEC's current cautious strategy compounds the potential for increased U.S. production. The cartel has delayed raising output due to subdued demand and competition from rival producers. A possible supply glut by 2025 could weigh further on prices. Meanwhile, U.S. production, already the highest globally, is expected to peak at 15.1 Mbpd by 2030, representing 20% of the world's total.

While Wright's pro-fossil fuel stance aligns with Middle Eastern producers' perspectives, his focus on expanding U.S. market share may limit direct collaboration. Middle Eastern national oil companies might see opportunities to invest in U.S. production and exports, but a domestic-first energy policy could heighten competition.

This article is part of Daily Market News & Insights

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