The future of the oil market remains uncertain under Trump with the imposition of more Iran sanctions and the 'drill baby, drill' mentality.

• Under a Donald Trump presidency, U.S. oil producers anticipate fewer regulations on crude production, resulting in increased supply and lower prices.
• Trump has pledged to impose additional sanctions on Iranian and Venezuelan oil, which could lead to a tighter global market and potentially increase oil prices.
• The possibility of trade wars under Trump could negatively impact global economic growth and decrease oil demand.

Under a Donald Trump presidency, U.S. oil producers anticipate fewer regulations on crude production, resulting in increased supply and lower prices.

The 2024 election winner, Trump, has pledged to impose additional sanctions on Iranian and Venezuelan oil, which could lead to a tighter global market and higher oil prices.

The possibility of trade wars under Trump could negatively impact global economic growth and decrease oil demand, resulting in a mixed outlook for the market's long-term prospects.

"The potential impact of a second Trump term on oil prices is uncertain, with short-term risks to Iran's oil supply and upside price risks, according to Goldman Sachs commodities analysts in a research note on Monday. However, there is also medium-term downside risk to oil demand and prices from a potential escalation in trade tensions, which could negatively affect global GDP."

During a speech at the Republican campaign headquarters in Florida on Wednesday, Trump expressed his support for increased U.S. oil production. He also mentioned Robert F. Kennedy, Jr., an independent candidate, and stated that he would be part of his team.

"Beware of oil, beware of liquid gold!" Trump joked. "We have more than Saudi Arabia and Russia." Kennedy is renowned for his environmental activism.

Despite campaigning on environmental stewardship, the Biden administration saw U.S. oil and gas production reach record highs.

Crude futures, including both West Texas Intermediate and Brent, are currently trading between $70 and $75 per barrel, which is below the price range many oil producers require to cover their expenses and maintain their budgets due to decreased global demand for oil and increasing supply.

Opening more drilling projects would increase supply, leading to lower prices and decreased revenues for American producers, according to Cole Smead, president and CEO of Smead Capital.

"If the Trump administration allows federal leases for oil and gas, federal lands will receive 25% of the revenues per barrel. However, it will be challenging to find an oil company that can make a profit at $52.50 per barrel with the remaining funds from a $70 barrel, as Smead stated in emailed notes. The only way for drill baby drill to occur is if oil prices rise based on these profit margins."

"Now that equity investors in the energy business understand what free cash flow is, they won't let it go. They will stop at nothing to increase capital expenditures."

'Clear competitive advantage'

The U.S. is the world's largest oil producer, accounting for 22% of the global total, while Saudi Arabia is the second-largest producer with 11%. Most of the U.S. crude is consumed domestically, making it the largest oil consumer globally.

The CEO of TotalEnergies advised CNBC that the incoming president should safeguard the U.S.'s energy edge.

Since the last two to three years, the production of oil in the U.S. has been at an all-time high, according to Patrick Pouyanne, who spoke to CNBC in Abu Dhabi.

""I believe the U.S. has a clear competitive edge in energy compared to many countries globally, and I am surprised to see anyone lose this advantage in the upcoming election," he stated."

While many predict lower crude prices due to Trump's support for domestic oil production and increased supply, Amrita Sen, founder and director of research at Energy Aspects in London, believes otherwise due to the threat of sanctions.

"Every hedge fund I've spoken to is bearish because Trump has tended to tweet about low oil prices. However, I believe it's the opposite," she said. "There are currently an enormous amount of sanctioned barrels in the market, particularly from Iran." Iran is currently producing 3.5 million barrels per day of crude or more, with 1.8 million of those being exported, as sanctions and their enforcement loosened under the Biden administration.

"When Trump was in power, Iranian exports were just 400,000 barrels per day. Now, with smuggling networks being bigger and better, you could potentially lose a million barrels per day," Sen said, also mentioning that some Venezuelan barrels could also go off the market.

Smead anticipates a bearish outlook, forecasting lower prices that could negatively impact producers, especially those with higher production costs.

""America's policies prioritize the cost of goods produced, and being a low-cost producer is crucial," he stated."