{"id":33085,"date":"2025-07-03T11:05:10","date_gmt":"2025-07-03T11:05:10","guid":{"rendered":"https:\/\/financialrush.com\/?p=33085"},"modified":"2025-07-03T11:05:10","modified_gmt":"2025-07-03T11:05:10","slug":"sentiment-sours-in-the-us-oil-patch-amid-low-crude-prices","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=33085","title":{"rendered":"Sentiment sours in the US oil patch amid low crude prices"},"content":{"rendered":"

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This article is an on-site version of our Energy Source newsletter.\u00a0Premium subscribers can sign up here<\/a>\u00a0to get the newsletter delivered every Tuesday and Thursday. Standard subscribers can upgrade to Premium here<\/a>, or explore<\/a> all FT newsletters<\/p>\n<\/div>\n<\/div>\n<\/div>\n

Howdy ya\u2019ll from Texas, and welcome to Energy Source.<\/p>\n

Today, I\u2019ll be focusing on why US oil producers, largely those here in Texas, refuse to turn on the spigots and drill more oil despite the recent price surge touched off by the Middle East conflict. The Lone Star state is critical in the energy world because its largest field, the Permian Basin in West Texas, accounts for 51 per cent of total American oil output.\u00a0<\/p>\n

How Texas goes, so goes the US.<\/p>\n

Before I get into that, I\u2019d like to alert you to a fascinating episode of the Financial Times\u2019 Behind the Money<\/em> podcast delving into how oil traders rightly called the Middle Eastern escalation shortlived and sold when crude prices soared.\u00a0<\/p>\n

The FT\u2019s energy editor, Malcolm Moore, does a turn this week on the show explaining how oil traders used social media and open-source intelligence to discover a global war was not as imminent as everyone feared. The episode is here<\/a>.<\/p>\n

Thanks for reading \u2014 Kristina.<\/p>\n

Low crude prices hammer US oil production and business sentiment<\/h2>\n

The recent fighting between Israel and Iran did nothing to lift the sour mood here in Texas. While oil prices for West Texas Intermediate, the US benchmark, climbed to $75.14 a barrel, they dropped less than a week later right back to where they started in the mid $60s.\u00a0<\/p>\n

Crude prices have plunged more than 15 per cent from a high of $80.04 at the start of the year thanks to Donald Trump\u2019s\u00a0tariffs, a slowdown in global economic growth and increased production from Opec+.<\/p>\n

Those lower prices are translating into tougher business conditions for energy companies, according to the Federal Reserve Bank of Dallas\u2019s quarterly energy survey released yesterday. The business activity index, a broad measure of conditions in the bank\u2019s coverage area, turned negative, declining from 3.8 in the first quarter to -8.1 in the second.<\/p>\n

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\u201cIt\u2019s hard to imagine how much worse policies and DC rhetoric could have been for US [exploration and production] companies,\u201d one respondent wrote. \u201cWe were promised by the administration a better environment for producers but were delivered a world that has benefited OPEC to the detriment of our domestic industry.\u201d<\/p>\n

Uncertainty is also growing among energy executives, according to the survey. The uncertainty index increased four points to 47.1 for the second quarter.<\/p>\n

The Dallas Fed\u2019s survey, conducted June 18-26,\u00a0measures the sentiments of energy companies located in Texas, southern New Mexico and northern Louisiana. The bank\u2019s assessment region is home to four of the country\u2019s major oil and natural gas production areas, which altogether pump more crude than many of the world\u2019s largest oil producers.<\/p>\n

During the second quarter, oil and gas production declined slightly. The oil production index slipped to -8.9, down from 5.6 in the first quarter. The natural gas index also turned negative, dropping from 4.8 to -4.5.\u00a0<\/p>\n

\u201cThe liberation day chaos and tariff antics have harmed the domestic energy industry,\u201d an executive wrote. \u201cDrill, baby, drill will not happen with this level of volatility. Companies will continue to lay down rigs and [frac] spreads.\u201d<\/p>\n

Frac spreads are the number of crews performing active hydraulic fracking of shale.<\/p>\n

This year\u2019s slumping crude prices have translated into fewer drilling rigs. Nearly half of energy executives said they expected to drill fewer new wells in 2025 than they had planned at the beginning of the year. Among the respondents, 26 per cent said they would cut rigs significantly, while 21 per cent reported they would decrease them slightly.<\/p>\n

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If prices remain at $60 per barrel over the next 12 months, 61 per cent of executives responded that their companies\u2019 oil production would decrease slightly. About 24 per cent said production would remain close to current levels.<\/p>\n

But their plans would markedly change if crude prices plummet to $50 per barrel and stay there for the next 12 months. About 46 per cent of executives said production at their companies would decrease significantly. About 42 per cent said production would drop slightly.<\/p>\n

\u201cThere is constant noise coming from the administration saying $50-per-barrel oil is the target,\u201d an energy executive wrote. \u201cEveryone should understand that $50 is not a sustainable price for oil. It needs to be mid $60s.\u201d<\/p>\n

Respondents expect on average $68-per-barrel WTI and a natural gas price of $3.66 per million British thermal units on the benchmark Henry Hub at the end of the year. (Kristina Shevory)<\/em><\/p>\n

Power Points<\/h2>\n