An oil pumpjack is seen in a field on April 08, 2025 in Nolan, Texas.
Brandon Bell | Getty Images
President Donald Trump’s trade war has thrown the oil market into deep uncertainty, triggering wild swings in crude prices, undermining investor confidence and jeopardizing domestic production.
U.S. crude oil hit a low of $55.12 on Wednesday, down 23% from the closing price on April 2 when Trump announced his sweeping plan to slap tariffs on more than 180 countries. The rapid pullback in prices threatens the president’s “drill, baby, drill” agenda as companies will struggle to boost output at profit.
But West Texas Intermediate staged a comeback after Trump suddenly reversed course Wednesday, announcing a 90-day pause on high tariffs for most trade partners with the exception of China. The U.S. benchmark swung 13% from its session low to close at $62.35 in response.
Trump’s decision to lower tariffs to 10% for most countries gave the market a temporary reprieve from fears of a spiraling trade war. But U.S. oil producers face an environment of “extreme uncertainty” that will make them hesitant about investment decisions, said Jim Burkhard, head of oil market research at S&P Global Commodity Insights.
Weaker confidence
West Texas Intermediate crude oil prices over the past month
“There’s a pause — the uncertainty has not gone away,” Burkhard said of Trump’s reversal. “Confidence about the future is weaker now than it was a month ago and prices are lower.”
“Can the U.S. negotiate with 70 countries all at once? I don’t think the chaos is over,” he said.
Trump’s on again, off again approach to tariffs is causing real damage, said Susan Bell, senior vice president of commodity markets at Rystad Energy. The safest option in times of uncertainty for asset-based businesses like oil companies is to reduce capital expenditures, Bell said.
“There’s a loss of confidence, not just in investment in the shale industry, but really investment in the United States,” she said.
Oil production threatened
Shale oil companies have driven the rapid growth of the U.S. into the world’s largest crude producer. These companies currently need U.S. crude prices to average at least $65 per barrel to drill new wells at a profit, according to executives at 81 companies surveyed by the Federal Reserve Bank of Dallas.
U.S. crude prices in the low $60s is the zone where companies may start drilling less over the next six months, Burkhard said. Producers will increasingly have to decide either to reduce lucrative returns for shareholders or scale back their activity in the oil patch, he said.
Some 50 rigs could get cut immediately with more potentially on the chopping block if prices remain at these levels, Bell said.
Goldman Sachs has lowered its price forecast for WTI to $58 by December 2025 and $51 by the end of next year. U.S. onshore oil growth would flatline if crude falls to range of $50 to $55 per barrel for a sustained period, said Walt Chancellor, an energy strategist at Macquarie Group.
Shale companies also face the threat of Trump’s steel tariffs potentially increasing the cost of new wells by 10%, Bell said. The companies would need even higher oil prices to drill new wells profitably, she said.
“It adds to costs at the time that their that oil prices are falling — it’s another hit,” Burkhard said of the steel tariffs.
U.S. shale producers were scathing in their criticism of Trump’s tariff policy in anonymous responses to the the Dallas Fed Energy Survey published in March.
One executive said “the administration’s chaos is a disaster for the commodity markets.” Trump’s call to “drill, baby, drill” is a “myth and a populist rallying cry,” the executive said. The president’s “tariff policy is impossible for us to predict and doesn’t have a clear goal,” the person said, calling for “stability.”
“I have never felt more uncertainty about our business in my entire 40-plus-year career,” another executive told the Dallas Fed.
U.S. Energy Secretary Chris Wright acknowledged Tuesday that tumbling prices will worry oil producers. Wright, the founder and former CEO of natural gas fracking company Liberty Energy, argued that Trump will drive down producers’ costs by removing uncertainty around permitting and approving more pipelines and export terminals, allowing them to pump at lower prices.
“Lower prices are good for consumers, and as producers get lower and lower cost structure, they’re going to thrive at lower prices as well,” Wright told CNBC’s “Money Movers.” “What you’re seeing right now is the fear and uncertainty as the sausage is being made,” he said of Trump’s tariff policy.
The unpredictability caused by Trump’s tariffs has also hit the stock of the company Wright founded. Liberty’s shares are down 32% since April 2.
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