President Donald Trump’s trade war has led to the oil market for deep uncertainty, causing wild swings in crude oil prices, undermining investors’ confidence and endangering national production.
American crude oil reached a minimum of $ 55.12 on Wednesday, 23% less than the closing price on April 2 when Trump announced its scanning plan to slap tariffs in more than 180 countries. The rapid recoil in prices threatens the agenda of “drills, babies, exercises” of the president, since companies will have difficulties in increasing production with profits.
But Western Texas Intermediate organized a return after Trump suddenly reversed the course on Wednesday, announcing a 90 -day pause on high rates for most commercial partners with the exception of China. The US point of US.
Trump’s decision to reduce 10% tariffs for most countries gave the market a temporary respite for fear of a spiral commercial war. But American oil producers face an “extreme uncertainty” environment that will doubt investment decisions, said Jim Burkhard, head of oil market research at S&P Global Commodity Insights.
Weakest trust
American crude oil fell more than 4% on Thursday to less than $ 60 per barrel, since merchants focused on Trump’s decision to increase tariffs over China to 125%. And it is not clear how negotiations with the dozens of countries that have received a postponement will work.
“There is a pause: uncertainty has not disappeared,” Burkhard said about Trump’s reversal. “The trust about the future is weaker now than a month ago and prices are lower.”
“Can the United States negotiate with 70 countries at the same time? I don’t think chaos is over,” he said.
Trump’s approach again and out of tariffs is causing real damage, said Susan Bell, senior vice president of basic products markets in Rystad Energy. The safest option in times of uncertainty for assets -based companies such as oil companies is to reduce capital expenses, Bell said.
“There is a loss of confidence, not only in investment in the shale industry, but really in investment in the United States,” he said.
Oil production threatened
Bituminous shale oil companies have brought the rapid growth of the United States to the world’s largest raw producer. These companies currently need crude prices to average at least $ 65 per barrel to drill new wells with profits, according to executives from 81 companies surveyed by the Dallas Federal Reserve Bank.
The prices of the US oil. Uu. In low $ 60 is the area where companies can start drilling less in the next six months, Burkhard said. Producers will have to decide more and more to reduce lucrative yields for shareholders or reduce their activity in the oil patch, he said.
Some 50 platforms could be cut immediately with more potentially in the cutting block if prices remain at these levels, said Bell.
Goldman Sachs has reduced its prognosis for WTI prices to $ 58 in December 2025 and $ 51 by the end of next year. The growth of oil in the US land. UU. It is placed if the crude falls within a range of $ 50 to $ 55 per barrel for a sustained period, said Walt Chancellor, Macquarie Group’s energy strategist.
Shooting companies also face the threat of Trump’s steel rates potentially increasing the cost of new wells by 10%, Bell said. Companies would need even higher oil prices to drill new wells profitable, he said.
“It adds to the costs at that time that … Oil prices are falling, it is another success, ”Burkhard said on steel tariffs.
The bituminous schista producers of the United States were scathing in their criticisms of Trump’s tariff policy in anonymous responses to the Dallas Fed Energy Survey published in March.
An executive said: “Administration chaos is a disaster for basic products markets.” Trump’s call to “Drill, Baby, Drill” is a “myth and a cry of populist rally,” said the executive. The “president’s tariff policy is impossible for us to predict and does not have a clear objective,” said the person, asking for “stability.”
“I have never felt more uncertainty about our business in all my career for more than 40 years,” another executive told Dallas Fed.
The Secretary of Energy of the United States, Chris Wright, acknowledged on Tuesday that fall prices will worry oil producers. Wright, founder and former CEO of the Natural Gas Fracking Company, Liberty Energy, said Trump will reduce producers’ costs by eliminating uncertainty around permits and approval of more pipes and export terminals, which will allow them to pump at lower prices.
“The lowest prices are good for consumers, already measure that producers obtain an increasingly lower cost structure, will also prosper at lower prices,” Wright told the “CNBC Money Motors.”
The unpredictability caused by Trump’s tariffs has also reached the stock of the company that Wright founded. Liberty’s shares have dropped 32% since April 2.
