OPEC+ Wary of Renewed US Oil Output Surge Under Trump: Reuters

The prospect of increased US oil production under a second Trump presidency has OPEC+ on edge, reports Reuters. The producer group, responsible for about half of the world's oil output, fears that a resurgence in US shale oil production could further erode their market share and hinder their efforts to support prices.

OPEC+'s concerns stem from the group's history of underestimating the rapid growth of US shale oil production. The US now pumps approximately a fifth of global supply, having overtaken Saudi Arabia as the world's top oil producer.

Delegates from OPEC+ allies suggest that Donald Trump's return to the White House could lead to a more favorable environment for the US oil industry, characterized by less stringent environmental regulations.

"I think a return of Trump is good news for the oil industry, with possibly less stringent environmental policies," said a delegate from a US ally OPEC+ member to Reuters. "But we may see higher production in the United States, which is not good for us."

This potential increase in US output threatens OPEC+'s plans to gradually increase production starting in April 2025. A further surge in US supply could lead to a price drop, severely impacting OPEC+ members heavily reliant on oil revenues.

Trump, campaigning on promises to reduce energy costs and inflation, has pledged to increase US oil production. This divergence in objectives creates a challenging dynamic for both sides, according to Richard Bronze, head of geopolitics at Energy Aspects.

"This is a potentially difficult dynamic for both sides," Bronze said. "OPEC+ has faced a big challenge from rising U.S. production, which has reduced the group’s influence."

OPEC+ is currently holding back 5.85 million barrels per day of output capacity following a series of cuts since 2022. The US, meanwhile, has seen its oil output rise by 11% to 21.6 million barrels per day in the 2022-2024 period, according to OPEC's own figures.

"The main threat to OPEC+ is increasing U.S. oil production under Trump, reducing the country’s dependence on imported oil and increasing exports," said a further source to Reuters.

While some analysts and industry executives remain unconvinced that US supply will see a dramatic increase under Trump, citing shale producers' focus on profitability, others warn that Trump's pro-drilling policies could lead to a surge in new oilfields.

"The U.S. has no spare capacity," said Bob McNally, president at Rapidan Energy Group and former White House official. "How much the U.S. will drill depends more on decisions made in Vienna than in Washington."