3 days Ago By Tsvetana Paraskova
The Trump Administration insists that U.S. shale will survive lower oil prices and could work well and innovate further at current price levels of WTI crude prices of about $60 per barrel, and even lower.
The industry is not convinced. if(window.innerWidth ADVERTISEMENTfreestar.
config.enabled_slots.push({ placementName: "oilprice_medrec_atf", slotId: "oilprice_medrec_atf" });';document.
write(write_html);} While public statements from the oil lobby and oil producers welcome President Donald Trump’s rollback of regulations and eased permitting processes, executives are privately fuming about the administration’s perceived target to bring oil prices down to $50 a barrel. Separately, the trade and tariff chaos in markets – triggered by President Trump’s tariffs, tariff pauses, and tariff exemptions – is depressing oil prices as analysts now believe a recession followed by lower energy demand is more likely to happen than not. U.
S. Petroleum Trade Surplus Undermined With oil prices down by more than 15% from last year’s levels, American oil exports could fetch lower prices for export. This will dent the absolute value of the U.
S. petroleum trade surplus, which America began to show with the surge in oil production in the shale revolution era. Before the shale boom in the 2010s, the U.
S. was running a deficit in petroleum trade as it was importing more crude and petroleum products than it exported. The shale revolution flipped the trade position to a surplus for America, and the U.
S. has been a net petroleum exporter every year since 2020. Related: Trump’s Trade War With China Enters a More Aggressive Phase President Trump’s tariff policies – which tanked oil prices and raised the odds of a recession – are undermining America’s petroleum trade surplus.
That’s not a desirable outcome for an administration fixated on fixing trade deficits. Petroleum and energy trade, in fact, is one of the few sectors in which the U.S.
has a large trade surplus in the dozens of billions of U.S. dollars annually.
Even if the EU, Japan, and South Korea pledge to buy and indeed buy more U.S. LNG and oil, part of the gains could be offset by weak prices and lower demand for energy in case all the tariff uncertainty brings about a global downturn or recession.
Weaker global demand for oil and gas would not support increases in U.S. oil production and doesn’t bode well for the future LNG export projects which need firm commitments to take the plans to final investment decisions.
“You claim that the energy industry is the darling of your economic plan, and you just made life very difficult,” Robert Yawger, director of the futures division at investment bank Mizuho Americas, told The Wall Street Journal . U.S.
Shale Growth At Risk Then there is the issue of how the U.S. could sustain production to remain the energy export superpower it has been over the past few years.
if(window.innerWidth ADVERTISEMENTfreestar.config.
enabled_slots.push({ placementName: "oilprice_medrec_btf", slotId: "oilprice_medrec_btf" });`;document.write(write_html);} U.
S. Energy Secretary Chris Wright, the former boss at fracking firm Liberty Energy, remains bullish on U.S.
oil production—and believes that the industry will not only survive but thrive even with oil at $60 or below. Yet, the industry begs to differ—at least that’s what executives wrote anonymously in March in comments to the quarterly Dallas Fed Energy Survey for the first quarter. “There cannot be "U.
S. energy dominance" and $50 per barrel oil; those two statements are contradictory. At $50-per-barrel oil, we will see U.
S. oil production start to decline immediately and likely significantly (1 million barrels per day plus within a couple quarters),” an executive at an exploration and production firm said. “The U.
S. oil cost curve is in a different place than it was five years ago; $70 per barrel is the new $50 per barrel,” the executive noted. Another executive put it even more bluntly, “The administration’s chaos is a disaster for the commodity markets.
"Drill, baby, drill" is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn't have a clear goal. We want more stability.
” Stability is the furthest from where the oil market has been in the past two weeks. Stability may be OPEC’s buzzword for ‘relatively high oil prices,’ but it is also crucial for the capital investment and drilling decisions in the U.S.
shale patch. Without any certainty about the cost of drilling wells – including the price of steel – producers face difficulty budgeting and maintaining shareholder payouts at current levels. Drilling and ‘all-in’ corporate costs, including overhead, dividend, and servicing debt, amounts to a cash flow WTI breakeven of $62.
50 per barrel for new activity in 2025, according to estimates by Rystad Energy . Executives at U.S.
firms think they need $65 per barrel, on average, to profitably drill a new well this year, per the Dallas Fed Energy Survey. WTI Crude prices have already dropped below this level and were below $62 a barrel early on Tuesday. Prices could drop further if global oil demand growth slows with weakening economies amid the trade and tariff chaos.
Even OPEC, the most bullish on oil demand of any forecaster, has just cut its 2025 and 2026 demand growth estimate. In the monthly report on Monday, OPEC said it sees global oil demand growth at 1.3 million barrels per day (bpd) in each of 2025 and 2026, down by 150,000 bpd for each of the two years.
OPEC’s very bullish forecast (and it should be such if the OPEC+ alliance wants to continue justifying easing of the production cuts) is two to three times higher than most other growth estimates by major Wall Street banks. After years of supporting oil prices with the production cuts, OPEC will also seek to regain market share at the expense of U.S.
shale. In this context, the U.S.
Administration’s tariffs and the uncertainty they bring for American producers undermine the American energy dominance agenda. By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.
com.
