OPEC+ vigilant with 'unpredictable' Trump set to roil crude market

Many in the oil industry are cheering the return of Donald Trump, the most oil-friendly president in modern times, but officials in producer alliance OPEC+, which includes sanctions targets Russia, Iran and Venezuela among its members, are taking a more cautious approach.

Trump took office Jan. 20 vowing to "drill, baby, drill" to bring down gasoline prices and refill the US' Strategic Petroleum Reserve, as well as pledging to defeat America's foreign enemies, bring peace to Ukraine and the Middle East and impose trade tariffs on oil suppliers Mexico and Canada and leading importer China.

The dizzying array of proposals and executive orders is set to reverberate through oil markets, throwing up challenges for OPEC+, which is responsible for around 40% of global crude supply.

OPEC+ officials, speaking on condition of anonymity, said they were in a holding pattern in the face of an unpredictable second Trump presidency.

"OPEC+ has proven its ability to effectively manage the unpredictability of the US president's comments during his first term. In fact, his unpredictability is, paradoxically, predictable," said one source, adding that the alliance "remains steadfast in its mission" to ensure market stability.

Another senior OPEC+ official said the alliance is looking for "sustainable clarity" on key drivers of potential volatility, including US sanctions on Russia and Iran and Chinese demand. Trump has threatened to impose steep tariffs on Chinese imports.

Other potential price weakeners, including poor quota compliance among OPEC+ countries such as Iraq, Kazakhstan and the UAE are also under scrutiny, the source said.

Although OPEC+ will need to be nimble, its focus remains on "making consistent and predictable decisions that serve the common interests of producers and consumers," one source said.

Price rally

OPEC+ has started 2025 with a spring in its step, after harsher sanctions imposed on Russia by the US' outgoing Biden administration spurred a crude price rally. This has helped turn the page on a painful 2024, when weak prices piled pressure on the alliance.

In the wake of the sanctions announcements, oil prices rose above $83/b for the first time since August 2024. Platts, part of S&P Global Energy, last assessed Dated Brent at $80.32/b Jan. 21.

A key OPEC+ monitoring committee, co-chaired by Saudi Arabia and Russia, is set to meet Feb. 3 to assess market conditions, but the group is seen as unlikely to make any policy changes in the next few weeks.

OPEC currently plans to keep its current crude output quotas in place until April, when eight voluntary cutters will gradually reintroduce 2.2 million b/d of voluntary cuts. The group -- Saudi Arabia, the UAE, Kuwait, Kazakhstan, Algeria, Oman, Iraq and Russia -- delayed these plans three times in 2024 in the face of weak prices.

A senior OPEC+ delegate all but ruled out an earlier taper on the back of strengthening crude prices. "We're not going to abandon our plan just like that after working so hard," they told Energy.

Trump effect

While one OPEC+ delegate insisted it is "business as usual" for the alliance following Trump's inauguration, the group remains vigilant over his ability to distort the market.

Trump's plan to unleash US oil production and roll back environmental initiatives could further erode OPEC+ market share and exert downward pressure on oil prices. In recent years, high production in the Americas -- including in the US, Guyana, Brazil and Canada -- has hampered efforts by OPEC+ to shore up the market, despite the alliance holding 5.8 million b/d of crude off the market, denting the revenues of its members.

Trump was also a vocal critic of OPEC production cuts in his first term, arguing that the producer group was unnecessarily putting a floor under oil prices. "We heard from him that he will work to lower oil prices," said one delegate, adding that the alliance is "looking into how big an issue Trump's unpredictability about energy policy is for OPEC+."

Trump is also expected to tinker with US sanctions on Russia -- imposed after the invasion of Ukraine in 2022 -- as well as those on Iran and Venezuela which saw less enforcement under President Joe Biden.

Such changes would directly impact crude supply. And while tighter enforcement on Iran could support prices, potentially allowing OPEC+ to proceed with plans to taper cuts in April, a relaxation of sanctions on Russia spurred by a Ukraine deal could have the opposite effect.

One OPEC delegate said they did not have any information on whether talks between Trump's team and OPEC or OPEC+ would take place. The OPEC secretariat did not immediately respond to a request for comment Jan. 22.

OPEC+ plans to hold its next full ministerial meeting in Vienna on May 28, but can arrange extraordinary meetings at any time.