It is unlikely to have a significant impact. Over the past decade, U.S. domestic production has been more closely tied to benchmark price levels and company strategies rather than administration policies. Since Trump’s election, one of the main factors pressuring prices has been the “Drill, baby, drill” policy and the possibility of increased U.S. production. However, this has not been the primary driver of price movements, even though it may influence market sentiment. U.S. oil companies are currently prioritizing shareholder returns over aggressive production growth, a focus I do not expect to change simply because of a new administration.
How could lower oil prices next year impact majors' decisions regarding future investments and CapEx?
Lower prices may limit future investments, but I do not see a drastic change in strategy. A large portion of shareholder returns has been through buybacks, especially among global oil majors, with a few exceptions. For several months, we have suggested that these majors may be reaching the upper limit on share buybacks. With benchmark oil and gas prices likely to remain relatively low next year, companies may reduce or delay CapEx. Instead, they may choose to focus on preserving cash flow, operational efficiencies, and optimizing existing assets rather than expanding.
U.S. majors already benefit from a share price premium over their European peers due to a more lenient regulatory environment. What impact will new Trump policies have on this valuation gap?
We are seeing a clear valuation gap between U.S. and European oil majors, particularly when comparing P/E ratios or EBITDA. Recently, TotalEnergies suggested it might consider a U.S. listing, where there is generally more confidence in oil demand growth and the sector as a whole. This difference is reflected in the strategies of U.S. majors compared to European ones. With Trump’s pro-fossil-fuel stance, this valuation gap could widen, potentially pushing other European majors to consider a U.S. listing.