Under the Texan sun, the annual golf tournament of the Permian Basin Petroleum Association, organized on April 7, was held in particular circumstances. Participants – oil tankers in the region – have the habit of monitoring the price of a barrel more often than they look at the time. However, recently, the market has experienced some upheavals. In the days following the ads of April 2, the West Texas Intermediate (WTI) plummeted under the 60 dollars, reaching its lowest since 2021, before returning to some ground. Cacophony around customs duties has fueled the fears of an inflationary thrust and an economic slowdown. Result: the International Energy Agency (IAI) lowered its world demand forecasts. Goldman Sachs, for his part, envisaged an extreme scenario, in which the Brent price would pass under 40 dollars in 2026.
The American president has never hidden it: guaranteeing low prices at the pump at his compatriots is one of his priorities. “It is counting on the drop in oil prices as a lever to reduce inflation and thus encourage the Fed to lower its rates, which would accelerate growth and make new investments for oil tankers easier,” said Emmanuel Hache, scientific assistant to IFP Energies Nouvelles. In parallel, through her mantra “Drill, Baby, Drill”it displays the objective of a strong increase in production, thanks in particular to a regulatory relaxation.
But reconciling these two ambitions is difficult. First, because the reality of the market has changed. “A large part of the oil resources have been exhausted since Trump’s first term. What remains is more difficult to extract, and therefore more expensive,” explains Livia Gallarati, analyst of the oil markets in Energy Aspects. Thus, in view of the current conditions, this firm does not provide for an increase in American production this year. On the other hand, “regulatory simplifications are not sufficient to encourage producers to invest in new boreholes. This is the price that remains decisive”, insists Homayoun Falakshahi, oil analyst in Kpler.
The profitability of new pressure projects
Basic support of the Republican candidate during the campaign, producers are starting to cringe. On the front line, the shale oil players, who provide most of the American volumes. Their investments are more sensitive to short -term price variations than their conventional oil counterparts, explains Livia Gallarati. According to the Dallas Federal Reserve, they need, on average, a price at 65 dollars so that new boreholes are profitable. However, at the levels of 61 or 62 dollars observed in recent days, this profitability becomes uncertain.
Joined by L’Express, John Bozeman, at the head of the small oil and gas company Braken Operating, says “ready to accept certain sufferings so that world trade is more equitable”. While issuing reserves on the effectiveness of the Trump administration policy. “At the current price of 62 dollars, our current operations have a positive cash flow. But all our drilling projects, however modest they were, have been canceled,” he admits.
In addition, certain materials necessary for the construction of pipes – such as steel – are now struck by customs taxes and therefore more expensive to import. Another headache for producers. Kirk Edwards, president of the Texan Latigo Petroleum oil and gas producer, explains that he has covered all of his production at the beginning of January, thus securing a minimum price for the year. “This allows us to sleep better at night, but not to start over, recognizes the manager. No independent will set up a drilling platform at present, given the low oil price and the increase in the necessary capital due to customs duties. The economic situation is very bad at the moment”.
During the first quarter, already, the morale of the sector was not in good shape. In a survey carried out by the Dallas Federal Reserve, certain exploration and production companies shared their concerns. Among the responses, anonymized, one could read: “It is extremely difficult to plan new developments at present due to the uncertainty that surrounds steel products” or “global geopolitical agitation and uncertain economic results of tariff policies […] suggest that it is necessary to take a break in expenses. “
OPEC + tests American resilience
As if uncertainty around trade policy was not enough, on April 3, eight OPEC + countries announced to increase their production volumes faster than anticipated, exacerbating an already downward trend. The official explanation? “Healthy market fundamentals and positive market prospects”. For Francis Perrin, director of research at IRIS and specialist in energy issues, this declaration is a trompe-l’oeil. “No one believes in good economic prospects for the petroleum market. It is a way of caressing Trump in the direction of the hair and responding to their request to produce more to lower prices. The temporality – the day after the day – is not accidental”.
At the end of January, Donald Trump had urged the cartel in 23 countries, of which the United States is not part, to lower the crude price, to limit Russia’s resources in his war against Ukraine. Because for the American president, these low prices also constitute a geopolitical lever. “He could use it as a means of pressure against Iran. If he manages to convince Saudi Arabia to lower them for a while, this would weaken Tehran, who is already weakened by the loss of several allies,” explains Jean-Pierre Favennec, specialist in energy issues and professor at Paris Dauphine.
In doing so, Trump plunges the Texans oilmen embarrassment. “OPEC + comes to test the resilience of American producers. If their activity drops or stagnates, the cartel will be able to reconquer market share it has lost in recent years,” explains Homayoun Falakshahi.
Continuation of the trade war, strengthening sanctions against certain producing countries … Many factors can change the situation on crude prices in the coming weeks. Marlen Shokhitbayev, director at the scope ratings rating agency, sees a significant risk that they continue to drop. “Oil companies still have a certain financial room for maneuver … as long as the Brent price falls below 60 dollars”. In view of the uncertainty that reigns, American producers only have to hang on.
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