OPEC+ and the Trump Presidency: The Bull Turns Bearish
The following blog is distilled from an interview on CBC’s “The Eyeopener,” hosted by Loren McGinnis who interviewed Enverus Intelligence® Research’s (EIR) very own Al Salazar. Click here to listen to the full radio segment.
Consequences for U.S. Shale and Alberta Oil
Among these developments are OPEC+’s decision to unwind cuts; Brent, the world’s benchmark crude oil trading in the low $70s per barrel; and the increasing global trade uncertainty given President Donald Trump’s tariff tactics.
This article provides an analytical overview of these elements and their implications for U.S. shale and Alberta producers.
Revising Oil Price Forecasts
Initial forecasts factored in current fundamentals, such as low inventories, an inverted curve and stock draws, and resulted in EIR’s projection that Brent would average $80 per barrel in 2025. Recent events have necessitated a downward adjustment. EIR’s commodity chief Al Salazar now estimates Brent at $70 per barrel in 2025, decreasing to $65 in 2026. Similarly, West Texas Intermediate (WTI), a key U.S. price indicator, is expected to hover at $5 lower than Brent. There’s an upside to the forecast if sanctions on Iran are tightened and supplies reduce.
OPEC+’s Role and Decisions
OPEC+’s recent announcement to unwind production cuts was unexpected and overturned the market. Unlike previous strategies where the alliance of oil producers delayed cuts and aimed to stabilize prices, the current approach indicates a willingness to increase output despite falling prices. This shift appears driven by internal dynamics, such as the United Arab Emirates producing above its quota while the Saudis bear the brunt of maintaining production levels. This divergence could potentially undermine the cartel’s cohesion. It also conveniently aids President Trump’s desire for lower oil prices.
Geopolitical Dynamics: Tariffs and Energy Strategy
President Trump’s tariff policies have injected significant volatility into global markets, further complicating oil price predictions. The tariffs, both implemented and threatened, have eroded consumer confidence, evidenced by a dip in the University of Michigan’s consumer confidence index into recessionary territory. This economic uncertainty, combined with Trump’s unpredictable energy policy, contributes to a bearish outlook for oil prices. This year is on track to be economically worse than 2024.
The administrative maneuvers, including mixed signals about the now-shelved Keystone XL pipeline project, undermine business investment and exacerbate global economic instability. The potential for recession looms in tariff-affected countries, in EIR’s opinion.
U.S. Shale: Plateauing Growth and Higher Costs
U.S. shale production has been crucial in meeting global demand over the past decade. However, the sector faces significant headwinds. Investors are demanding substantial returns while the quality of shale plays is diminishing. High-quality, low-cost resources are becoming scarce, and the cost of extraction is rising. Consequently, many analysts (including EIR) see U.S. shale production plateauing within five years.
Producers are in a difficult spot since lower oil prices do not align with the higher breakeven points of current shale operations. Without price support, sustaining current levels of production becomes challenging, eventually impacting consumers as supply-side dynamics ripple through the global oil market.
Alberta Producers: Financial Implications
Alberta, heavily reliant on oil revenue, faces substantial fiscal challenges in the new environment. The provincial government’s projections for WTI at $68 per barrel in 2025-26 are already conservative, yet still higher than our revised forecasts. “For each dollar that WTI fluctuates, Alberta’s royalty revenues vary by approximately $750 million. A continued decline in oil prices could result in multibillion-dollar deficits over the coming years.” – Al Salazar, Director of Macro Oil & Gas Research, EIR
Producers in Alberta will similarly grapple with reduced capital spending commitments, forcing them to reevaluate their financial and operational strategies. The financial health of both the provincial government and key industry players will be crucial in navigating this altered landscape.
Potential Bullish Counterarguments
While the outlook appears bearish, other factors could shift the forecast:
- Inventory levels of crude and products are low, and geopolitical events or stringent sanctions against countries like Iran or Venezuela could tighten supplies.
- Chinese demand could surpass expectations.
- OPEC+ retains the ability to reverse its production decisions if prices fall too steeply.
- Refilling the U.S. Strategic Petroleum Reserve might offer some price support.
Navigating the Ongoing Uncertainty
The energy market is in a state of flux, with revised oil price forecasts reflecting new realities shaped by geopolitical actions and economic uncertainties. For further insights and detailed analysis on the evolving energy landscape, we invite you to speak with our team to see how our oil and gas research can help you navigate the tumultuous world we live in today.
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations, and macro-economic forecasts, and helps make intelligent connections for energy industry participants, service companies and capital providers worldwide. See additional disclosures here.
