Following Donald Trump’s historic return to the White House, the US dollar has gone on to a bull rally, seeing it soar to a 2-year high. The greenback rally alone, at most times, would account for global commodity prices softening, only that this time around it is aided by strong supporting fundamentals, as demand concerns persist, and supply outlook offers initial signs of a glut as early as 1Q 2025.

While the ongoing conflicts in Ukraine and the Middle East have shown no real signs of easing considerably, the market seems to have priced in enough of a premium in this regard. Further escalation has very limited upside, even as Iran mulls to respond to Israel’s attack earlier this month. Any real supply disruptions across vital trade routes or production centers are largely being ruled out by observers, as all conflict-involved territories have refrained from targeting sensitive energy installations.

This is where the focus shifts to demand concerns, of which, China continues to be the number one concern. Even an unprecedented Chinese economic stimulus package, has failed to provide any sort of optimism to the overall demand outlook, as details that later emerged show the stimulus may have a limited impact on actual public consumption.

To top it all off, Opec is finding it hard to keep the optimism going, as it revised global oil demand projections downward once again. This is the fourth consecutive downward global demand revision from Opec, as it is beginning to take stock of the situation, particularly in China. Leading research houses now see India as the major growth driver in Asia, taking over from China.

OPEC now expects global oil demand to grow by 1.82 million barrels per day (bpd) this year, down by 107,000 bpd from last month’s assessment, the cartel said in its closely-watched Monthly Oil Market Report. Total world oil demand is anticipated to reach 104.0 million bpd in 2024, bolstered by strong transportation fuel demand and ongoing healthy economic growth, particularly in a number of non-OECD countries, said OPEC.

Even as the bets on the US Fed rate cut intensify, the unwinding of production cuts from Opec beginning in 1Q225 carries a significant risk of a supply glut. Although the cartel, in the recent past has delayed unwinding production cuts, often voluntarily by the leaders of Saudi Arabia and Russia, other members may well refrain from joining any extension of a production cut beyond 2024. With Donald Trump back in the White House, drilling activities in the US are expected to surge. Read this with more barrels expected to be pumped in by Opec members – and a supply glut seems imminent. Short of extreme geopolitical scenarios, oil prices may well be on their way to a sustained period of depression.