US clay oil producers are facing their heavier threat over the years, as a sudden price of raw prices caused by Donald Trump’s trade war has pushed parts of the sector in the wake of failure, the leaders have warned.
The US oil prices have fallen 12 percent since the announcement of Trump’s “ERUTING DAY” fees last week, leaving them below the level that many manufacturers in Texas say they should break even – and fear that the industry could be forced to empty with empty.
The latest OPEC decision to increase production has also raised the alarm bells.
“It reminds me exactly Covid,” said Kirk Edvard, president of Latigo Petroleum, an independent manufacturer based in Odessa, Texas, referring to the 2020 awards that led to a wave of bankruptcy throughout the clay sector.
Then, the oil markets were facing the twin threats of falling demand and new supplies from OPEC manufacturers such as Saudi Arabia, which last week announced a plan to increase supplies faster than expected in the coming months.
“We are facing a double wonder again,” Edvard said, adding that if prices do not recover in the next two months, there may be “destructive events” in the Permian Basin – the most fruitful oil field in the world and the American industry room.
Bill Smead, leading investment official at Smead Capital Management, who owns shares in some clay producers, said the tariff war had created a “bloody mess” that risked scaring investors away from oil and gas business.
“Trump wants to get the price of oil at $ 50 and you will end with half the number of companies in the industry if it happens,” he said. “This will result in M&A with the strong taking of the weaker players’ parts.”
Oil sale in recent days has been dramatic-and comes alongside major unrest in global net-capital markets caused by Trump’s decision to start a global trade war.
The US president on Wednesday said he was withdrawing from the fiercest taxes he had planned, sending the stock market significantly higher. Oil prices also increased, with the US Marker West Texas intermediate hitting $ 63 per barrel on Wednesday – but they remain well from this year’s heights and deep in the danger zone for many manufacturers.
Analysts said Trump’s decision to leave tariffs in China – the world’s largest oil importer – will continue to approach the prospects of global raw demand.
Bill Farren-Price at the Oxford Institute for Energy Studies said: “There was a lot of sustainable expectations for increasing oil demand this year. I think they are all now in the bin. “
With less than $ 60 per barrel, many US oil manufacturers will fight to return a profit, especially on some of the country’s aging basins, forcing them to potentially stop drilling, throw drilling equipment and let the employees go.
Rystad Energy said many US clay manufacturers faced $ 62 per cost per WTI barrel when the debt service and dividend payment were included.
Possible demand companion has been exacerbated by fear that Saudi Arabia, one of the world’s lowest cost manufacturers, could be ready to take a new market share by pumping more oil and allowing prices to move lower, forcing rival manufacturers from business.
OPEC’s decision to add 400,000 barrels of oil a day to global supplies had pressured the raw prices even before the Trump’s trading war.
The riots have also sparked a sale in the shares of clay producers, which face higher production costs than conventional oil drilling. Okidental Petroleum and Devon Energy lost more than 12 percent of their value in five days since Trump announced “his reciprocal fees”.
The crash is not at the same degree as 2020. Then, the US standard briefly traded below zero as the granular global demand of Covid-19-sending the clay industry to a deep freezing and causing thousands of work losses as the results of bankruptcy companies.
But the industry has organized a tremendous recovery since then, with Wall Street forcing manufacturers to repair balances and avoid costly drilling sprees. The new era of capital discipline has left the manufacturers in the best condition to address a new decline, analysts say.
US oil production has been recovered since the 2020 shock and has reached a record of more than 13 million barrels a day in 2024.
But analysts who were expecting the country to reach even greater volumes this year is now going back production forecasts, with the first decline in production from the pandemia now possible.
S&P Global Commodity Insights said this week that $ 50 oil can cause production to fall with more than 1M B/D – a cry away from the Trump administration’s goal for rapid production to reduce gas prices in the US.
Many US oil executives supported Trump in last year’s elections, but have been withdrawing from the pricing turn since he came to office. Some executives have grown critical of the White House energy strategy.
“This administration better has a plan @secretarywright,” said Kaes Van’t Hof, President of Diamondback Energy, in a post on social media this week aimed at Energy Secretary Chris Wright. “The only industry that actually built itself at the US, produced in the US, increased work at the US and improved the trade deficit (and with a power of attorney) in the US over the past decade. Smart movement.”
Van’t hof did not respond to a comment request.
Adrian Carrasco, owner of the Premier Energy Services, who is located in the Midland-OSSA region, said he was not panicking because many clay producers protect the price of oil they sell for six to 12 months. But he said tariffs will increase costs for the industry.
“It’s a concern because now their prices have increased 25 percent additional for buying the exercise tube. When this is rising and your bought oil price is not growing, well, you have to fix.”
