Donald Trump’s call to a new oil boom will be thwarted by the reluctance of Wall Street to approve another drilling frenzy, the shale owners warned.
TOTAL US OIL OUTPUT IN TRUMP’s Second Term WILL RISE BY LESS THAN 1.3MN BARLES A DAY, SAID RYSTAD ENERGY AND WOOD MACKENZIE, WELL BELOW THE 1.9MN B/D RISE ACHIEVE UNDER JOE BIDER AND MUCH LESS THAN IN THE SHALE BONANZA YEARS IN THE Previous decade.
Managers have said that investor pressure on businesses and economic realities in a sector are still receiving oil prices would be obstacles to Trump’s quest to launch an era of “American energy domination”.
“Incitation, if you want to, to unravel, to baby, to unravel. . . I simply do not believe that companies will do so, “said Wil Vanloh, director general of the Information Capital Energy Partners, one of the largest investors in the shale sector.
“Wall Street will dictate here – and what do you know?” They have no political agenda. They have a financial program. . . They have no incitement to say to management teams who direct these companies to go more well, “said Vanloh.
Reality on the ground could be a disappointment for Trump, who bet that a big leap in oil supply can push American inflation by making goods and fuel cheaper.
“We will lower prices. . . We will again be a rich nation, and it is this liquid gold under our feet that will help to do so, “said the president in his inauguration speech on Monday.
In Davos on Thursday, he also called the OPEC cartel to reduce oil prices, which suggests that this would allow central banks to reduce interest rates in the “immediately” world.
But the drop in oil and gas prices would make shale companies less profitable – and less likely to follow Trump’s command to “drill, baby, forest”, warned the executives.
“Prices will be a higher signal than policy,” said Ben Dell, director of director at Kimmerridge, an energy investment company that has shale assets, especially in the Texas basin, the most prolific oil field in the world.
Once the production of American oil has reached a record level last year, the Ferive Information Administration expects production to increase only 2.6% to 13.6 million min / d in 2025 BC to increase by less than 1% in 2026 due to pressures on prices.
Some shale producers are also concerned about the fact that the best places have been exploited after more than a decade of vertiginous exploration through states such as Texas and Northern Dakota.
After his oath ceremony this week, Trump signed decrees to “free up” new oil and gas supplies and declare a “national energy emergency”. He also moved to eliminate the regulations of the Biden era which, according to the Foreurs, increased their limited costs and activities.
But the leaders warned that even Trump’s full support for fossil fuels and deregulation could have a limited impact.
“As much as the incoming administration is very favorable in terms of energy and power. . . We do not see a significant change in activity levels in the future, ”said David Schorlemer, financial director of Proetro, an petroleum service company in Permian.
The reluctance of producers comes after two decades of growing growth – and sometimes punished the volatility of oil prices.
The production of American oil and gas has exploded in the past 15 years while the forests have found ways to unlock large deposits locked in shale rocks. Wall Street financed a low-down drilling race that has made the United States the world’s largest producer of oil and gas.
But brutal price planting in 2014 and 2020 sparked widespread bankruptcies, a more cautious approach to investors and a change in producers’ behavior – in particular in the face of softer gross prices.
A recent survey of the Federal Kansas City reserve revealed that the average price of American oil necessary for a substantial increase in borehole was $ 84 per barrel, compared to around $ 74 a barrel today.
JPMorgan plans that US oil prices will derive a barrel by $ 64 by the end of this year and that shale activity “slows down to a ramp” in 2026.
“If the prices are anemic, you can delete all the administrative formalities you want. This will not move the needle on production, “said Hassan Eltorie, director of companies and research on transactions at S&P Global Commodity Insights.
The second largest American oil producer Chevron – A huge shale investor – plans to reduce spending this year for the first time since the pandemic oil crash, binding from $ 14.5 billion to $ 15.5 billion for 2025 , against $ 15.5 billion at $ 16.5 billion last year. Exxon, in comparison, will increase his capex in the years to come.
Conocophillips plans to reduce the expenses of $ 500 million compared to last year, and western oil and eog resources must maintain the almost flat activity levels – decisions designed to please Wall Street.
“The shareholders of these energy actions. . . If you do more [capital spending] They would not allow it, they will cry bloody murder and sell your stock, “said Cole Smead, director general of Smead Capital Management, who invests in a handful of oil companies, including Chevron and Western Petroleum.
