The world of energy is constantly evolving, and the recent inauguration of the new president of the United States has once again placed American energy policy front and center on the global stage. On January 20th, the newly appointed leader unveiled an ambitious agenda dubbed "America First," which includes a sweeping re-evaluation of energy policies that have, until now, prioritized climate regulations and limitations on liquefied natural gas (LNG) exports. This dramatic shift signals a push to bolster domestic crude oil and natural gas production, restore the traditional petrochemical industry, and ultimately drive economic growth and job creation while lowering energy costs for American households.

This policy overhaul has significant implications for the global energy market and has already begun to affect oil prices worldwide. On the very day the new policy was announced, international oil prices saw a notable decline. For instance, Brent crude oil futures plummeted to a low of $78.50 per barrel, while West Texas Intermediate (WTI) crude oil prices dropped from a previous high of $80 to around $76. Such fluctuations may reflect a sense of confusion among investors grappling with the new administration's complex and rapidly evolving rhetoric on energy policy.

The proposed energy policies from the current U.S. government are ambitious and controversial. The plan includes withdrawing from the Paris Agreement, which aimed to curtail fossil fuel reliance in favor of renewable energies. Additionally, the administration plans to revoke previous mandates for electric vehicles and halt associated financial subsidies. Another prominent part of the agenda involves replenishing the U.S. strategic petroleum reserve back to its maximum capacity, tweaking the energy project approval process to simplify it, and accelerating the construction of energy infrastructure by reducing federal regulatory constraints. This also includes leveraging Alaska and other federal lands for energy development and pledging to slash domestic energy prices by 50% within the upcoming year.

Analysts view these developments as favorable for the traditional energy sector within the U.S. The latest forecasts from the U.S. Energy Information Administration predict that by 2025, daily crude oil production in America could reach an astonishing 13.53 million barrels. This projected growth largely stems from American shale oil and natural gas extraction companies that stand to benefit tremendously from these encouraging policy changes. Industry giants like ExxonMobil and Chevron have already seen surges in their stock prices, indicative of investor optimism driven by the government's pro-fossil fuels stance.

Furthermore, the outlook for American LNG exports appears robust. In a mere few years, the U.S. has ascended to the position of the world’s largest LNG exporter and holds the title of the largest gas supplier to Europe. According to data released by the European Union, American LNG imports constituted approximately 46% of the total gas imports in 2023, nearly doubling since 2021. Projections suggest that by 2024, the share of U.S. LNG exported to Europe could rise to as high as 55%. Even amid this growth, the U.S. persistently encourages the EU to increase its purchase of both crude oil and LNG from American sources.

This series of changes could further solidify the U.S. position as a dominant energy producer and exporter on the global stage, while simultaneously unsettling the current international energy landscape. The ramifications of this shift are anticipated to weigh heavily on the Organization of the Petroleum Exporting Countries (OPEC), as the U.S. now represents the largest producer of natural gas, accounting for nearly 25% of the global supply. With the continued upgrades to infrastructure and enhancement of export capabilities, America's influence in the global oil market is poised to rise, presenting a formidable competitive challenge to traditional energy-exporting nations. However, market analysts caution that the lengthy exploration and extraction cycles mean that these new policies may not lead to immediate capital investments or production increases, but could foster speculative behaviors in the market instead.

As far as the current state of the oil market is concerned, the strength of the dollar has curbed some upward pressure on oil prices. However, much of the recent sell-off can be attributed to investor anxiety over the considerable uncertainties linked to the new administration’s energy policies. Many investors are seeking to liquidate positions to secure profits amidst this confusion. Ultimately, the fundamental factors driving oil price fluctuations remain rooted in supply and demand dynamics. Some research institutions even warn that oil prices could dip to $60 per barrel in the medium term, suggesting that stakeholders need to be prepared for such eventualities.

Despite these warnings, bullish sentiment still prevails in the market. Following a period of predominantly negative outlooks on crude oil prices, a shift has begun to surface among market investors. Oil traders are purchasing more futures contracts as the New York Stock Exchange's data indicate that net positions in oil and fuel contracts transitioned from bearish to bullish between September and December of 2024. By the end of 2024, net long positions may equate to about 404 million barrels, with speculative traders having already started to establish oil positions long before November 2024. In just the first three weeks of this year, funds’ net long positions in oil have surged by an impressive 41%, while short positions plummeted by a third.

Historically, geopolitical events have played a significant role in shaping oil price trajectories, and this year is expected to be no different, albeit more complex. The rapid increase in crude oil output from the U.S. and non-OECD countries, coupled with unresolved tariff issues and the ever-present threat of trade friction, could lead to sudden and volatile price swings. Serious geopolitical conflicts remain ever unpredictable and could exacerbate the situation further. According to Goldman Sachs, there is an expectation that Brent crude oil prices will oscillate between $70 and $85 per barrel this year.

OPEC has its insights as well. In its most recent monthly oil market report, the organization projected that global daily oil demand will increase by 1.45 million barrels in 2025, totaling 105.2 million barrels. OPEC intends to continue its strategy of production limits to maintain price stability, although it does not rule out employing tactics that could flood the market with oil in extreme situations to undermine its rivals. In this battle for market share, the U.S. stands as OPEC’s most significant threat.