Trump’s rapid-fire policy changes have created an atmosphere of uncertainty across financial markets. Crude oil, like other commodities, has been volatile as investors worry Trump’s tariffs could weaken the economy—and therefore oil demand.
The “drill, baby, drill” president supports a policy of U.S. energy dominance. But his policies are double-edged for the industry. He wants more oil produced at lower prices, posing a challenge to companies that profit on higher prices.
Oil prices fell this week on tariff worries. West Texas Intermediate futures traded below $67 per barrel Friday. Brent, the international benchmark, was under $71 per barrel.
“Prices are lower than anybody’s definition of fair market value,” said Ed Morse, senior advisor at Hartree Partners. He ascribed lower prices to tariff concerns, a recent statement by the new energy secretary about the possibility of $50 oil, and plans for new production by the OPEC+ oil cartel.
Morse spoke at the CERAWeek by S&P Global energy conference in Houston, where the mood among traders was bearish. He said oil prices should rise as summer approaches and driving demand increases. Tariff uncertainty clouds forecasts, however.
Energy Secretary Chris Wright received a warm welcome at the conference. He promised the industry the Trump administration would clear hurdles for more drilling and transportation of energy.
He was earlier quoted by the Financial Times as saying he wants more oil supply, and that production could drive prices lower. The industry could still drill at $50 a barrel, the newspaper reported Wright saying.
Many analysts say that level is uneconomic for the shale industry.
Barron’s asked Wright in Houston if he expects a $50 oil price. “I’m not here to talk about energy prices. I don’t know oil prices,” Wright said. “We want more supply.”
Some additional supply will come from OPEC+. The group is made up of Saudi Arabia-led OPEC and its ally Russia. The group said on March 3 it had agreed to begin the reversal of its more than two years of production cuts and would add 138,000 barrels a day to the market in April.
While the boost is relatively small, the timing surprised traders. It is the first step in returning 2.2 million barrels to the market by 2026.
“OPEC+ announced an increase in production at price levels where they previously would have extended the cuts,” said Jim Burkhard, vice president and head of research for oil markets, energy and mobility at S&P Global. “They cut when prices were much higher than they were today.”
The production boost followed calls by Trump for the cartel to add supply. Burkhard believes that wasn’t a coincidence. Some OPEC members also wanted to increase supply.
“Now you have Russia willing to accommodate U.S. interests in the oil market,” Burkhard said in an interview. “That is the big change, and then you had Saudi Arabia involved in it as well. So you had the big three having mutual interests in geopolitics and oil,” he said.
After the U.S., Saudi Arabia and Russia are the world’s second and third largest oil producers.
The U.S. relationship with longtime adversary Russia has warmed as the Trump administration attempts to end the war in Ukraine. Saudi Arabia is hosting cease-fire talks.
“The U.S., at least as long as Trump is president, is going to be a moderating influence on prices,” Burkhard said.
An agreement to end the war in Ukraine might also add more oil to the market, if it leads the U.S. to end sanctions on Russia. OPEC+ would still determine production, however, S&P global said in a research note.
Slowing oil demand may also hold down prices. The international agency forecasts growth of one million barrels a day this year, a reduction from previous estimates.
There are 600,000 surplus barrels produced each day.
Also bearish for prices is a record high in oil considered spare capacity. That production can be brought back quickly. Spare capacity is about six million barrels a day, S&P global estimates.
China’s thirst for oil is slackening. Growth in demand for refined products for fuel peaked in 2023, according to Pei Wang, vice president of the Sinopec Economics and Development Research Institute. China’s overall oil demand growth was just 1%, and was driven by petrochemicals, she said in an interview.
Petrochemical demand will continue to grow, she said. The country’s demand for natural gas grew by 8% last year, and that demand should not peak until 2040, she said.
“India is growing but it isn’t going to offset China,” Burkhard said.
Oil consumption in Africa is relatively low but could rise along with fast-growing populations. African demand is “a wild card because it could surprise us to the upside,” Burkhard said.
That is on top of the uncertainty posed by an unpredictable Trump administration. New tariffs could change the outlook again. Producers will be left to catch up.
