Wall Street will hind

Donald Trump’s call for a new oil boom will be frustrated by Wall Street’s reluctance to approve another drilling binge, the shale chiefs warned.

The total production of American oil in Trump’s second mandate will increase by less than 1.3mn barrels per day, said Rystad Energy and Wood Mackenzie, well below the 1.9mn b/d increase reached under Joe Biden and much less than in the Years of Shale Bonanza in the years in the previous decade.

Executives said that the pressure of investors on companies and the economic realities of a sector always entrusts to oil prices would be obstacles to Trump’s search to launch an era of “domain of American energy.”

“The incentive, if you want, to pierce, baby, pierce. . . I just don’t think companies do that, “said Wil Vanloh, executive director of the Quantum Energy Partners Private Group, one of the largest investors in the shale sector.

“Wall Street will dictate here, and do you know what? They do not have a political agenda. They have a financial agenda. . . They have zero incentives to basically tell the management teams that run these businesses that will drill more wells, ”said Vanloh.

Reality on the ground could be a disappointment for Trump, who is betting that a great leap in the oil supply can overcome the inflation of the United States causing goods and fuel to be cheaper.

“We will reduce prices. . . We will be a rich nation again, and it is that liquid gold under our feet that will help do it, ”said the president in his inauguration speech on Monday.

On Thursday, in Davos, he also asked the OPEC poster to reduce oil prices, which suggests that this would allow central banks to reduce interest rates worldwide “immediately.”

But the lowest prices of oil and gas would cause shale companies to be less profitable, and less likely to follow Trump’s command to “pierce, baby, drill,” the executives warned.

“The prices will be a larger signal than politics,” said Ben Dell, managing partner of Kimmeridge, an energy investment firm that has bituminous shale assets, even in the Texas Permica basin, the most prolific oil field in the world.

After US oil production reached a record record last year, the Energy Information Administration expects production to grow only 2.6 percent to 13.6 mn B/d in 2025 before increasing by less than 1 percent in 2026 due to price pressures.

Some bituminous shale producers are also worried that the best locations have taken advantage of after more than a decade of vertiginous exploration in all states such as Texas and Dakota del Norte.

After his swear ceremony this week, Trump signed executive orders to “unleash” new oil and gas supplies and declare an “national energy emergency.” It has also moved to eliminate the regulations of the Biden era that the perforators say they increased their restricted costs and activity.

But executives 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 around energy and power. . . We do not see a significant change in the levels of activity in the future, ”said David Schorlemer, financial director of Prpetro, an oil services company in the Permian.

The reluctance of producers occurs after two decades of increased growth, and sometimes punishing the volatility of the price of oil.

The production of oil and gas from the United States exploded in the last 15 years when perforators found ways to unlock large deposits locked in bituminous shale rocks. Wall Street financed a drilling race that made the United States the largest oil and gas producer in the world.

But the brutal is blocked in the price in 2014 and 2020 triggered generalized breaks, a more cautious approach to investors and a change in producers’ behavior, especially in the face of softest raw prices.

A recent survey of the Kansas City Federal Reserve found that the average price of American oil necessary for a substantial increase in drilling was $ 84 per barrel, compared to approximately $ 74 per barrel today.

JPMorgan predicts that the US oil prices will be reduced to $ 64 per barrel at the end of this year and that the shale activity is “slowed” in 2026.

“If prices are anemic, you can eliminate all the bureaucracy you want. He will not move the needle to production, “said Hassan Eltorie, Business Director and Transaction Research in S&P Global Commodity Insights.

The second largest oil producer in the United States, Chevron, a large lutitas investor, plans – $ 16.5bn last year. Exxon, in comparison, will raise its capex in the coming years.

Conocophillips expects to reduce spending by $ 500mn since last year, and Western oil and EOG resources must maintain approximately plans of activity, decisions designed to please Wall Street.

“The shareholders of these energy actions. . . If you do more (capital spending) more than they would allow, they will shout bloody murders and sell their shares, ”said Cole Smead, executive director of Smead Capital Management, who invests in a handful of oil companies, including Chevron and Western Petroleum.