Shale boss says Wall Street will thwart Donald Trump’s U.S. oil surge plans

Shale bosses have warned that Donald Trump’s calls for a new oil boom will be thwarted by Wall Street’s reluctance to greenlight another drilling spree.

Rystad Energy and Wood Mackenzie say U.S. oil production will be less than 1.3 million barrels per day in Trump’s second term, well below Joe Biden’s 1.9mb/d rise and well below the shale bonanza years the first ten years.

Executives said investor pressure on companies and the economic reality of an industry that always weighs on oil prices will be obstacles in the era of Trump’s quest to promote “American energy dominance.”

“The incentives are just to drill, baby, drill, if you will. . . . I just don’t believe companies are going to do it,” said Wil Vanloh, chief executive of private equity group Quantum Energy Partners. is one of the largest investors in the shale industry.

“Wall Street is going to decide here – you know what? They don’t have a political agenda. They have a financial agenda. . . . Their motivation is basically to tell the management teams that run these businesses to go drill more wells,” Van Loo said.

The reality on the ground may disappoint Trump, who has bet that greater oil supplies can beat U.S. inflation by making the commodity and gas cheaper.

“We’re going to lower prices. . . . We’re going to be a rich nation again, and it’s the liquid gold at our feet that will help do that,” the president said in his inaugural address on Monday. ”

On Thursday, he also called on the Opec cartel to cut oil prices, suggesting this would allow central banks to lower interest rates around the world “immediately.”

But lower oil and gas prices will make shale companies less profitable and less likely to follow Trump’s order to “drill, baby, drill,” executives warned.

“Prices are going to be a bigger signal than politics,” said Ben Dell, managing partner of Kimmelich, an energy investment firm that owns shale assets including in the Texas Perimeter Basin (the most prolific oil field in the world).

After U.S. oil production reaches record highs, the Energy Information Administration expects output to rise just 2.6% to 13.6 million b/d in 2025, before rising by less than 1% in 2026 due to price pressures. 1%.

Some shale producers are also concerned that the best spots are being dug up after more than a decade of groundbreaking exploration in states such as Texas and North Dakota.

After his swearing-in ceremony this week, Trump signed executive orders to “unlock” new oil and gas supplies and declare a “national energy emergency.” He also moved to eliminate Biden-era regulations that drillers say increased costs and restricted activity.

But executives warn that even Trump’s full support for fossil fuels and deregulation may be limited.

“The incoming administration is very good for energy and power. . . . We don’t see a significant change in activity levels,” said David Schorlemer, chief financial officer of Permian oilfield services company Propetro. ”

Producers’ reluctance has sometimes punished oil price swings after two decades of growth.

Over the past 15 years, U.S. oil and gas production has exploded as drillers found ways to unlock vast deposits of sediment locked in shale rock. Wall Street financed a long-running drilling race that turned the United States into the world’s largest oil and gas producer.

But brutal price collapses in 2014 and 2020 triggered widespread bankruptcies, more cautious investors and changes in producer behavior, especially in the face of soft crude prices.

A recent Kansas City Fed survey found that the oil price needed to drill large volumes of oil would average $84 a barrel, compared with $74 a barrel today.

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

“If prices are anemic, you can remove all the red tape you want,” said Hassan Eltorie, director of corporate and trading research at S&P Global Commodities Insights.

Chevron, the second-largest U.S. oil producer and a huge shale investor, plans to cut spending this year for the first time since the pandemic oil crash, budgeting $14.5 billion through 2025 to $15.5 billion, low That compares to $16.5 billion from $15.5 billion last year. ExxonMobil, by contrast, will raise its capital expenditures over the next few years.

Conocophillips expects to lower spending by $500 million compared with last year, and Occidental Petroleum and EOG Resources will keep activity levels about flat – decisions designed to please Wall Street.

“Shareholders of these energy stocks . . . if you do more [capital spending] They will scream bloody murder and sell your stock if they allow it.