A Brighter Tomorrow. The Energy Report 04/25/2025

$50 a barrel oil may not be sustainable for oil producers today but with better regulations and the ingenuity of the US oil and gas industry we will be able to do that in the future. The Trump Administration has reduced the approval time for new oil and gas projects to a maximum of 28 days using an emergency procedure.

President Trump’s action to bring down oil prices has been so successful, but it may be too fast for US oil producers to adjust and stay profitable. US Energy Secretary Chris Wright admitted yesterday the $50 barrel oil is not sustainable for U.S. oil producers at this time because too much of good thing is a bad thing for oil producers. The recent sharp drop in oil prices has caused some pain for shale oil producers.

Drillers are starting to pull back on drilling plans. Shale boss Bryan Sheffield, the son of Pioneer Natural Resources founder Scott Sheffield, appears to have called on America’s shale drillers to cut drilling immediately.

ConocoPhillips (COP.N), amid a broad push to rein in costs and streamline operations after its $23 billion buyout of rival Marathon Oil cut jobs. As Reuters reported, many companies say they cannot drill profitably if oil prices fall under $65 a barrel. Reduced regulations and streamline production will take a little bit of time for the regulatory cost savings to show up in the breakeven points for US oil producers. So, it seems like Energy Secretary Chris Wright is suggesting there should be a $50 floor in the US oil market. The United States may buy oil for the SPR if prices stay around $50 a barrel. This $50 floor may be supported until regulatory cost reductions lower production costs.

Reuters reported that Iraq sent a delegation to Damascus on Friday to study the possibility of restoring an Iraqi oil pipeline that transports oil through Syria to Mediterranean ports, the prime minister’s office said. The Iraqi delegation, led by the head of the National Intelligence Service, is also set to discuss counter-terrorism cooperation, border security and ways to expand trade between the two countries, the office added.

Iraqi Prime Minister Mohammed Shia al-Sudani held talks with Syria’s President Ahmed al-Sharaa in Qatar this month, marking their first meeting since the ousting of former President Bashar al-Assad in December after more than 13 years of civil war.

Syria is facing a severe energy crisis after the collapse of its oil industry during civil war and is now turning to local intermediaries for oil imports. Its efforts to secure oil through public tenders have been largely unsuccessful owing to international sanctions and financial risks.

Russian insurance firms, some sanctioned by the U.S., are seeking approval in India for oil tanker coverage.

Iran’s Oil Minister reports that the gas deal with Russia is not finalized yet but aims to agree on it soon. He also notes numerous uncertainties in the global oil market, including tariffs. Reuters reported that oil prices erased earlier gains after a spokesperson from China’s foreign ministry said China and the United States were not having any consultations or negotiations on tariffs. That contradicted earlier comments by U.S. President Donald Trump, who said on Thursday trade talks between the U.S. and China were underway.

China is considering exempting some U.S. imports from its 125% tariffs and is asking businesses to provide lists of goods that could be eligible in the biggest sign yet of Beijing’s concerns about the economic fallout from the trade war. China hiked its tariffs after Trump announced higher levies on Chinese goods.

President Trump continues his peace initiatives. He suggested progress between Russia and Ukraine and indicated openness to meet directly with Iran’s ‘s President or Supreme Leader. President Trump also predicts Saudi Arabia will go into the Abraham accords.

In a wide-ranging interview with Time magazine this morning, President Trump made several statements that impacted the market. For example, President Trump expressed his support for raising taxes on the wealthy. This comment is likely to elicit strong reactions from liberal individuals, who often argue that President Trump prioritizes the interests of billionaires.

Additionally, President Trump addressed oil prices, suggesting that he would consider it a victory if the US imposed a 50% tariff within the next year. He also voiced his support for banning congressional stock trading, noting that numerous Democrats are beginning to indicate their intention to step down from Congress. Furthermore, President Trump stated that he would veto any bill proposing cuts to Social Security and Medicare, directly responding to criticisms that falsely accuse him and his associate Elon Musk of seeking to reduce these programs.

Conflicting signals is keeping oil locked in a trading range. There definitely seems to be a lot of concerns that if oil goes above $65 a barrel it will be a problem for the economy and of course with rumors of a potential increase in OPEC production that’s going to give the market a ceiling anywhere from 65 to 70. On the downside of course we already know that the trump administration is starting to get concerned about the viability of US producers so I would expect to see some rhetoric that would support prices if they started the fall too far. Even with this drama there are still risks of an upside price spike as supplies versus demand are much tighter than the market is suggesting any type of supply shock whatsoever could send prices soaring in what could be a massive short covering rally. Of course if there are no supply shocks we can stay locked in this trading range for an extended period of time.

Natural gas is still in its seasonal slumber after a report that showed yesterday that supplies of natural gas rose 88 billion cubic feet. But if you look at the big picture we could be near a significant bottom as supplies right now are 44 BCF below the five-year average. Keep in mind it’s been a very long time that we have been below the five-year average in this market.

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