Energy Shots #119:

Energy Shots #119 brings the second feature of the three-part mini-series on notable infrastructure, fundamental, and geopolitical themes for global energy markets in 2025 that we kicked off with last week’s report on 2025+ global refining capacity growth.

With approximately two weeks until the inauguration of President-elect Trump, demand-side variables remain the predominant driver of crude market narratives.

While global economic uncertainty and underwhelming demand in growth centers like China, ‘other’ Asia, and Europe warrant continued monitoring, demand-side fixation ignores the reasonable probability that the second Trump administration will bring imminent changes to the global crude supply landscape through the return of sanctions enforcement on ~4.28 MMb/d of combined Iranian and Venezuelan crude output.

Trump v. Venezuelan & Iranian Oil

Sanctions enforcement under the Trump 1.0 administration collapsed combined Iranian and Venezuelan crude production by over 60% from 6.17 MMb/d in January 2017 to 2.47 MMb/d in December 2020.

• Venezuelan crude production fell from 2.1 MMb/d in Aug 2017 to 441 kb/d in Dec 2020 after the Trump administration began its ‘maximum pressure’ campaign against the Maduro Regime in Aug 2017.

• Iranian crude production fell from 3.81 MMb/d at the start of the Trump administration’s ‘maximum pressure’ campaign on Iran in May 2018 to 2.03 MMb/d by the end of Trump’s first term in December 2020.

2021-2024 Production Rebound

The Biden administration’s unofficial easing of sanctions enforcement from the start of the global BTU crisis in 2022 through the Maduro regime’s dubious 2024 election victory allowed combined Venezuelan and Iranian crude production to rebound to a post-Trump peak of 4.28 MMb/d in November 2024.

• Venezuelan crude production gained from 484 kb/d in Jan 2021 to 960 kb/d in November 2024.

• Iranian crude production gained from 2.1 MMb/d in Jan 2021 to 3.32 MMb/d in November 2024.

The Return of ‘Maximum Pressure’?

Whether the second Trump administration returns to its previous ‘maximum pressure’ campaigns remains unclear. However, some level of sanctions enforcement on Venezuela and Iran will likely return soon after the administration assumes office later this month.

• While the supply impact could be much greater, the combined increase in Venezuelan and Iranian output of ~1.7 MMb/d from the start of the Biden administration in Jan 2021 to November 2024 serves as a reasonable starting volume of ‘at risk’ supplies from Trump 2.0 sanctions enforcement.

Variables that could determine the severity of the market’s response to losing ~1.7 MMb/d of sanctioned barrels include the following:

• US, European, and Middle Eastern crude inventories have steadily drawn to historically low levels. Total US crude inventories are at their lowest seasonal level since 2014. Cushing crude stocks are at their lowest seasonal level on record (since at least 2008).

• OPEC delayed the return of 2.2 MMb/d of voluntary production cuts to April 2025 and will unwind its total 5.86 MMb/d of production cuts in phases through September 2026.

• North American (US/Canada) 2025 production growth. US production gained 0.25 MMb/d M/M in October to 13.49 MMb/d— the largest month-on-month increase since September 2022 and a new record high for total US output.

• Guyana’s 2025 production growth, which will likely gain 250 kb/d by year-end 2025 to a total of 0.9-1.0 MMb/d.

• OPEC, the IEA, and the EIA show varying 2025 demand growth forecasts of +1.4-1.5 MMb/d, +1.1 MMb/d, and +1.3 MMb/d, respectively.

Takeaway: Saudi Arabia Determines 2025 Response

Saudi Arabia will likely determine the market’s response to a Trump-led return of US sanctions on Iran and Venezuela.

• Saudi Arabia has produced an average of 8.96 MMb/d of crude in 2024, approximately -653 kb/d and -1.63 MMb/d versus the kingdom’s average for 2023 and 2022 respectively. We can reasonably estimate spare Saudi capacity at 1.5 MMb/d.

A swift drop in Iranian and Venezuelan barrels followed by another extension to OPEC/Saudi production cuts in April would reasonably drive undersupply conditions in 2025 with historically depleted storage.

Conversely, an ‘as planned’ return of OPEC/Saudi production with base-case non-OPEC production growth (US/Canada/Guyana) could offset lost Iranian/Venezuelan supplies.

Additional demand-side variables to consider include:

• A measurable improvement in Chinese demand in response to existing/forthcoming economic stimulus

• Non-US/US economic recession

• Bullish energy demand effects from Trump tariff threats on countries with outsized trade surpluses against the United States

Please reach out to the Mobius team to explore more of these scenarios, their regional impacts, and potential opportunities ahead of the Trump administration’s Iran/Venezuela sanctions policy changes.

See you next Sunday.

ES.

This commentary contains our views and opinions and is based on information from sources we believe are reliable. This commentary is for informational purposes, should not be considered investment advice, and is not intended as an offer or solicitation concerning the purchase and sale of commodity interests or to serve as the basis for one to decide to execute derivatives or other transactions. This commentary is intended for Mobius clients only and is not considered promotional material.