As U.S. President-elect Trump is set to return to the White House, his proposed tariff policies have sparked market concerns about global oil price declines. Goldman Sachs commodity analysts pointed out in their latest report that if Trump imposes a 10%-20% tariff on all countries, especially a tariff as high as 60% on Chinese goods, it could lead to a slowdown in global trade, thereby suppressing oil demand. Under this scenario, Brent crude oil prices could fall to just above $60 per barrel by the end of 2026, a nearly 20% decrease from the current price of about $74.
Furthermore, Trump's advocacy for deregulation and support of the fossil fuel industry could lead to a further increase in U.S. oil production. Currently, U.S. oil production is at a historic high, reaching a new record of 13.4 million barrels per day in August. If supply continues to increase, it could exert further downward pressure on oil prices.
Nevertheless, Goldman Sachs analysts believe there is still room for oil prices to rise in the short term. If Iranian oil supplies decline due to stricter sanctions, Brent crude prices could rise to $83 per barrel by mid-2025. At the same time, global oil demand growth is expected to recover next year, with demand from major oil-consuming countries including the U.S. and China likely to increase. Recent stimulus measures by the Chinese government are expected to boost consumer confidence and drive demand growth.
However, the International Energy Agency (IEA) warned in its report this month that the oil market could experience a surplus of 1 million barrels per day next year, mainly due to sluggish demand and rising production from non-OPEC countries. This indicates that although oil prices might rise in the short term, they still face downward pressure in the medium to long term.
Economic Impact:
If Trump enacts broad tariff policies, it could lead to a slowdown in global trade, thereby dampening oil demand and dragging down oil prices. A drop in oil prices could negatively affect the economies of oil-exporting countries, reducing their fiscal revenue and impacting global economic growth. Meanwhile, a decline in oil prices could reduce investment in the energy sector, affecting the development of related supply chains. However, for oil-importing countries, lower oil prices could reduce energy costs, alleviate inflationary pressure, and boost consumption and investment. Overall, the impact of falling oil prices on the global economy will vary across different countries and industries.
