Investing.com — President Donald Trump's energy agenda, anchored by the slogan “drill, baby, drill,” promised to reduce regulatory barriers, increase fossil fuel production, and lower commodity prices.
However, the reality of energy production in the US is often based on economic decisions made by independent producers rather than political guidelines. These companies, answerable to their shareholders, must weigh the dynamics of the global market when considering whether to increase drilling activity.
According to Wells Fargo (NYSE:) analyst Ian Mikkelsen, while a divestment of oil and natural gas is likely under the Trump administration, the scale and impact of these changes remains uncertain. The regulatory reform process may face delays and competition from other legislative priorities.
Furthermore, the majority of Republicans in Congress could block the scope of the reforms.
“One area that could be easily fixed is the permit system for drilling on federal land,” Mikelsen said.
The Biden administration, in 2021, implemented stricter leasing and permitting policies and increased production fees, leading to a marked decline in the issuance of new drilling leases. Streamlining the process could reduce operating costs for companies operating in the oilfield sector, which accounts for about 12% of US oil production.
With the current lack of clarity about the potential limits of withdrawals, Wells Fargo is keeping its picks within the energy sector.
Specifically, the firm continues to recommend Consolidated Oil and Midstream Energy companies to investors seeking exposure.
Oil prices rose on Wednesday as the market turned its attention to potential disruption from US sanctions targeting Russian energy companies and tankers transporting Russian crude.
In its monthly oil market report released on Wednesday, the International Energy Agency (IEA) highlighted the potential impact of the latest sanctions, noting that they could significantly disrupt Russian oil supply and distribution. The agency added that “the full impact on the oil market and access to Russian supply is uncertain.”
Concerns about sanctions appear to be supporting prices, along with expectations of a potential cut in US oil prices this week.
The key issue remains the extent to which Russian supply will be removed from the world market and whether alternative sources or measures can compensate for any resulting shortfall.
Meanwhile, OPEC projects that global oil demand will increase by 1.43 million barrels per day in 2026, keeping the same growth rate as expected in 2025.
This forecast is in line with OPEC's long-term outlook, which expects oil demand to continue to grow over the next two decades. This is in contrast to the IEA's view, which predicts that demand will increase by the middle of this decade as the global transition to clean energy accelerates.