Wall Street will thwart Donald Trump's US oil hike plan, say shale bosses

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President Donald Trump's call for a new oil boom will be thwarted by Wall Street's reluctance to approve a new drilling frenzy, shale bosses have warned.

Total U.S. oil production during Trump's second term will increase by less than 1.3 million barrels per day, Rystad Energy and Wood Mackenzie said, well below the 1.9 million bpd increase achieved under Joe Biden and much less than during the boom years of shale during Trump's second term. previous decade.

The executives said investor pressure on companies and the economic realities of an industry still reliant on oil prices would pose obstacles to Trump's quest to launch an era of American energy dominance.

The incentive, if you will, to just drill, baby, drill…I just don't believe companies are going to do that, said Wil VanLoh, managing director at private equity group Quantum Energy Partners, the one of the largest investors in the shale sector. .

Wall Street will dictate here and you know what? They have no political agenda. They have a financial agenda… They have no incentive to tell the management teams that run these companies to go drill more wells, VanLoh said.

The reality on the ground could be disappointing for Trump, who is betting that a big increase in oil supply can curb U.S. inflation by making goods and fuel cheaper.

We will bring prices down…We will be a wealthy nation again, and it is the liquid gold under our feet that will help us get there, the president said in his inauguration speech Monday.

In Davos on Thursday, he called on the OPEC cartel to cut oil prices, suggesting that would allow central banks to immediately cut interest rates around the world.

But falling oil and gas prices would make shale companies less profitable and less likely to follow Trump's order to drill, baby, drill, executives warned.

Prices will be a bigger signal than politics, said Ben Dell, managing partner at Kimmeridge, an energy investment firm that owns shale assets including Texas' Permian Basin, the the most prolific oil producer in the world.

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After U.S. oil production hit a record high last year, the Energy Information Administration expects output to rise just 2.6 percent to 13.6 million bpd in 2025 before to increase by less than 1 percent in 2026 due to price pressures.

Some shale producers also worry that the best locations have been exploited after more than a decade of frenzied exploration in states like Texas and North Dakota.

After his inauguration ceremony this week, Trump signed executive orders to release new oil and gas supplies and declare a national energy emergency. He also moved to eliminate Biden-era regulations that drillers said raised their costs and limited their activities.

But leaders warned that even Trump's wholehearted support for fossil fuels and deregulation could have limited impact.

Even though the new administration is very pro-energy and power, we don't see a significant change in activity levels going forward, said David Schorlemer, chief financial officer of ProPetro, a utility company. Permian oil tankers.

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The producers' reluctance comes after two decades of dazzling growth and sometimes punishing volatility in oil prices.

U.S. oil and gas production has exploded over the past 15 years as drillers have found ways to unlock vast deposits locked in shale rock. Wall Street financed a frenzied rush to drill that made the United States the world's largest producer of oil and gas.

But sharp price falls in 2014 and 2020 triggered widespread bankruptcies, a more cautious approach from investors and a change in producer behavior, particularly in the face of falling crude prices.

A recent survey by the Federal Reserve Bank of Kansas City found that the average price of U.S. oil needed for a substantial increase in drilling was $84 per barrel, up from about $74 per barrel today.

JPMorgan predicts that U.S. oil prices will fall as low as $64 a barrel by the end of this year and that shale activity will slow to a crawl in 2026.

If prices are anemic, you can cut out all the red tape you want. That won't move production forward, said Hassan Eltorie, director of corporate and trading research at S&P Global Commodity Insights.

Chevron, the second-largest U.S. oil producer, a huge investor in shale, plans to cut spending this year for the first time since the pandemic oil crash, forecasting a budget of $14.5 billion to $15.5 billion for 2025, compared to $15.5 billion to $16.5 billion last year. Exxon, by comparison, will increase its investments in the coming years.

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ConocoPhillips plans to cut spending by $500 million from last year, and Occidental Petroleum and EOG Resources are expected to keep their activity levels roughly flat, moves designed to please Wall Street.

The shareholders of these energy stocks… if you do more [capital spending] more than they allow, they will cry bloody murder and sell your stock, said Cole Smead, managing director of Smead Capital Management, which invests in a handful of oil companies, including Chevron and Occidental Petroleum.

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