President Donald Trump’s calls for a new oil boom will be thwarted by Wall Street’s reluctance to approve another ton of drilling, shale bosses have warned.
Total US oil production in Trump’s second term will rise by less than 1.3mn barrels per day, Rystad Energy and Wood Mackenzie say, far ahead of the 1.9mn B/D rise achieved under Joe Biden. said Cher, far less than during the Bonanza era. previous 10 years.
Executives said investor pressure on companies and the sector’s economic realities, always visible in oil prices, will be obstacles to Trump’s quest to begin an era of “American energy domination.”
“Just to train, baby, drill if you will…” said Wil Vanloh, chief executive officer of private equity group Quantum Energy Partners, one of the shale sector’s biggest investors. It is stated as follows.
“Wall Street dictates here. And you know what? They don’t have a political agenda. They have a financial agenda. . . . They basically has zero incentive for the management teams running the businesses to dig and drill more wells,” VanLoo said.
The reality on the ground may be a disappointment for Trump, who is betting that a big jump in oil supplies can beat our inflation by making goods and fuel cheaper.
“We’re going to bring prices down. . . . We’re going to be a rich country again, and it’s the liquid gold under our feet that will help us do that,” the president said in his inaugural speech on Monday. Ta.
In Davos on Thursday, he called on the OPEC cartel to cut oil prices, suggesting that this would allow central banks to “soon” cut interest rates around the world.
But lower oil and gas prices have made shale companies less profitable and less likely to follow Trump’s orders to “drill, baby, drill,” executives warned.
“Prices are a bigger signal than politics,” said Ben Dell, managing partner at Kimmeridge, an energy investment firm that owns shale assets including the world’s most prolific oil field, the Permian Basin in Texas. says.
After U.S. oil production hit a record high last year, the Energy Information Administration expects production to increase by just 2.6% to 13.6 million b/d in 2025 before 2026. Price pressure will increase by less than 1% in 2020.
Some shale producers are also concerned that prime locations have been tapped after more than a decade of intense exploration across states like Texas and North Dakota.
After this week’s swearing-in ceremony, Trump signed an executive order to “unlock” new oil and gas supplies and declared a “national energy emergency.” He also moved to eliminate Biden-era regulations. This, drillers say, has increased costs and restricted activity.
But executives warned that even Trump’s completely corrupt support for fossil fuels and deregulation may have limited impact.
“The next administration has a huge advantage over energy and power…” said David Schorlemer, chief financial officer of Propetro, a Permian oilfield services company.
Producer reluctance comes after two decades of soaring growth and sometimes punishes oil price volatility.
U.S. oil and gas production has exploded over the past 15 years as drillers have found ways to unlock vast deposits trapped in shale rock. Wall Street financed the drilling race in the middle that made the United States the world’s largest producer of oil and gas.
However, the brutal price crashes of 2014 and 2020 led to a more cautious approach from investors and a change in producer behavior, especially in the face of soft crude prices.
A recent Kansas City Federal Reserve study found that the average U.S. oil price required for a significant increase in drilling was $84 per barrel, compared to about $74 per barrel today.
JPMorgan predicts that U.S. oil prices will fall to $64 per barrel by the end of this year and that shale activity will “slow to a crawl” in 2026.
“If prices are anemic, you can remove all the red tape you want,” said Hassan Eltorie, director of company and transaction research at S&P Global Commodity Insights.
America’s second-largest oil producer, Chevron, a huge shale investor, plans to cut spending for the first time since the pandemic oil crash, from $15.5 billion to $15.5 billion last year. Budget to $15.5 billion. In comparison, Exxon will raise its maintenance in the coming years.
Conocophillips is expected to cut $500 million from last year, and Occidental Petroleum and EOG Resources is to keep activity levels roughly flat.
“Shareholders in these energy stocks…if we could do more… [capital spending] “We’ve seen a lot of growth in oil prices,” said Cole Smead, chief executive officer of Smead Capital Management, which has investments in a handful of oil companies including Chevron and Occidental Oil.
