Trump’s National Energy Emergency Aims to Press Oil Prices LowerWhat goes up eventually comes down. This is even more true for oil prices amid a range of forces at play. The recent rally has been popped by significant headwinds facing crude oil prices.
WTI Crude Oil (“WTI) has trended down sharply amid sluggish demand and a surplus in supply. Global oil consumption has remained tepid, with China's economic recovery slower than expected and U.S. fuel demand showing seasonal weakness.
WTI prices rallied sharply higher from mid-Dec until mid-Jan, driven by optimism over Chinese demand rebound expectations in 2025. Adding to that was the Biden administration’s tightening of sanctions on Russian crude, targeting producers and over 180 vessels transporting 1.7 million bpd (~25% of Russia’s exports).
WTI optimism quickly faded as Trump took office on 20/Jan. He signed an executive order to boost oil & gas production, removing barriers and reversing Biden’s climate policies. Since then, WTI prices have pulled back 7.74%.
Declaring a national energy emergency , Trump introduced measures to fast-track energy infrastructure and regulatory approvals, aiming to lower costs & increase energy independence.
At the World Economic Forum in Davos, Trump called on OPEC, particularly Saudi Arabia, to increase production and lower crude prices, triggering a fifth straight session of losses for WTI.
Source: EIA
The only tailwind to WTI prices amid all this oil gloom was the decline in crude inventories for the ninth consecutive week. The EIA reported a 1-million-barrel drop for the week ending 17/Jan, though it fell short of analysts’ 2.1-million-barrel forecast .
EIA FORECASTS WTI PRICES TO TREND DOWN
EIA in its latest STEO estimates WTI prices to fall throughout 2025 and 2026 on expectations of rising supply.
Source: EIA STEO
WTI prices are expected to average USD 70.31/barrel in 2025 & USD 62.46/barrel in 2026. The EIA expects OPEC+ to maintain production cuts to counter rising non-OPEC supply.
Lower prices are likely to curb U.S. drilling activity and investment, resulting in only a modest production increase in 2026. After hitting a record 13.2 million bpd in 2024, U.S. crude output is projected to rise to 13.5 million bpd in 2025 and grow by less than 1% in 2026, averaging 13.6 million bpd as price pressures slow activity.
This hints that Trump may have limited influence over U.S. production, as price remains the key driver. According to the Dallas Fed Energy Survey , U.S. oil firms need an average oil price of USD 64/barrel to drill profitably.
TECHNICAL INDICATORS SIGNAL POTENTIAL BEARISH TREND ON THE HORIZON
WTI crude oil futures have fallen sharply since 16/Jan. Along with it, the gap between the 9-day and 21-day moving averages has narrowed. The 9-day MA, which formed a golden cross on 13/Dec, now hints at a potential trend shift.
On 21/Jan, prices closed below the 9-day MA and are now near the 21-day MA, signalling a waning bullish trend. WTI prices started the week above the monthly R2 resistance level but has since fallen below it.
RSI began declining on 15/Jan after entering the overbought zone and dropped below its RSI-based moving average on 16/Jan. The MACD signalled weakening bullish momentum since 16/Jan, confirming a trend reversal and the start of a bearish trend on 23/Jan.
COMMITMENT OF TRADERS
For the week ending 14/Jan, managed money’s net long positioning in WTI crude oil (futures & options) fell 6.4% WoW, ending four weeks of sequential gains. Short positions surged 19.8% to 47,252 lots, while long positions declined 2.7% to 277,944 lots.
Source: CME QuikStrike
Scaling back of net long positions by managed money may be a signal of bearish expectations ahead.
HYPOTHETICAL TRADE SETUP
Trump’s push for lower crude prices will intensify downward pressure on WTI in an oversupplied market. Threats of tariffs further risk dampening global trade, delaying an oil demand recovery.
Do not write off the likelihood of a shock serving as a tailwind to oil prices. For now, pressure remains on oil prices to cool off in the near term, with ample forces pushing them lower.
Portfolio Managers and Traders can express this bearish view on WTI prices using CME Micro WTI Crude Oil Futures. CME Micro WTI Crude Oil Futures offer the same exposure to crude oil price movements as standard WTI futures, but at 1/10th the contract size, making them more accessible while creating alternatives for granular hedging.
This paper posits a short position in CME Micro WTI Crude Oil Futures (Mar 2025) expiring on 19/Feb (MCLH2025) with the following trade setup:
• Entry: 75.60/barrel
• Target: 71.50/barrel
• Stop: 77.00/barrel
• P&L at Target (per lot): +410 ((75.60 – 71.50) x 100)
• P&L at Stop (per lot): -140 ((75.60 – 77.00) x 100)
• Reward-to-Risk Ratio: 2.9x
CME Group has made a raft of products covering a range of asset classes more accessible while also enabling granular hedging for portfolio managers. Portfolio managers can learn more on how to access these micro products by visiting CME Micro Products page on CME portal to discover micro-sized contracts to gain macro exposures.
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MARKET DATA
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