Oil prices have risen as protests in Iran intensify, raising concerns among traders about the security of supply from OPEC, which exports most of its oil to China. This worry appears substantial enough to counter a bearish market mood following President Trump's announcement that the United States had begun selling Venezuelan oil. Reports that not all major oil companies are eager to rebuild Venezuela's industry, with Exxon specifically labeling the country "uninvestable," also countered that mood. The statement prompted President Trump to threaten blocking Exxon from working in Venezuela.
Meanwhile, trouble in Iran could spill over, jeopardizing oil transport through the Strait of Hormuz—a key global chokepoint often associated with regional instability. The current protests occur amid threats made by President Trump against the Iranian government. With the Venezuelan incursion surprising many, expectations are growing for more military action from the Trump administration, potentially beyond South America.
Saul Kavonic, head of energy research at MST Marquee, told Reuters that such expectations alone are insufficient to significantly push oil prices higher. "The market is saying show me the disruption to supply before materially responding," Kavonic said. The market may yet see that disruption: ANZ energy analysts noted in a report quoted by Reuters that calls have emerged for oil industry workers to down tools amid the protests. "The situation puts at least 1.9 million barrels per day of oil exports at risk of disruption," they added.
This development, along with any plans President Trump may have regarding Iran, places him in a complicated position. Higher oil prices would benefit the energy industry, which he has prioritized in his second term. However, higher prices would conflict with his campaign promise to secure affordable energy for Americans. OPEC might also reverse its production policy and start cutting output again.
President Donald Trump's campaign promise to secure affordable energy for Americans initially put him at odds with the oil industry, which was already suffering from low oil prices. The rift has deepened as the prospect of cheap Venezuelan crude pressures most players except Big Oil. Geopolitics continues to influence price-setting, which is favorable for oil producers but unfavorable for consumers.
Nearly every oil market forecaster predicted prices would drop even lower this year than in 2025, when benchmarks lost about a fifth of their value. Brent crude was forecast to average below $60, with West Texas Intermediate expected near $50, possibly falling below that level during the year. Forecasters also agreed that such low prices would prompt a production response from non-OPEC countries, notably the United States. Shale drillers, responsible for most U.S. oil output, would struggle to make ends meet at $50 or less per barrel and would likely curb production—a solid argument based on historical evidence. Yet, such a reaction would lead to higher oil prices, contradicting President Trump's campaign promise.
From the start, this was a risky proposition for independent oil companies in the shale patch and elsewhere. Big Oil can endure low prices much longer than independents. For independents, Trump's promise to jumpstart a revival in oil and gas—which had never stopped growing—has been mixed. His administration eased regulatory burdens and opened new exploration acreage from day one, but the promise of cheap oil has made it difficult for industry players to fully benefit from these changes.
The sustained decline in oil prices last year pushed capital expenditure on exploration and production below 2024 levels. This year, upstream capex is also projected to decline from 2025, according to Wood Mackenzie. The consultancy expects capex to fall in North America and Europe, while spending in Latin America, the Middle East, and Africa is set to increase.
The bearish oil outlook largely stems from oversupply estimates. Record amounts of oil on water, including sold cargoes en route, are often cited as one reason. Another is the gap between China's oil processing rates and imports. Both the International Energy Agency and the U.S. Energy Information Administration expect crude oil supply to exceed demand by six figures this year. Low oil prices have made President Trump happy, but the situation remains fluid.