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Trump's policies have upended trade flows

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Industry grapples with mass layoffs, activist investor

push

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Oil investment, output growth unlikely despite govt push

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Oil prices hover around $70 a barrel

By Arathy Somasekhar

HOUSTON, March 7 (Reuters) - The world's energy industry

leaders meet in Houston next week as plummeting oil prices push

Big Oil to slash thousands of jobs even as a pro-fossil fuel

U.S. administration encourages them to pump more.

U.S. President Donald Trump's first 47 days in office have

been marked by a rapid overhaul of government and policy,

including mass layoffs and the reversal of many of the policies

of the previous administration.

He has repeatedly exhorted the industry to "Drill, baby,

drill," and has ordered government agencies to slash red tape to

maximise U.S. oil and gas output - already at record levels

before he took power. He has ended a pause in new gas export

project approvals and overturned a ban on drilling in federal

waters.

Trump's policies on trade and foreign policy have, however,

threatened to drive up the cost of millions of barrels of oil

that U.S. refiners need from Canada and Mexico. His rapid pivot

on foreign policy with Russia could upend global oil flows and

reduce the European market for U.S. oil and gas, if the U.S.

eases sanctions on Russian energy in the case of a deal to end

the war in Ukraine.

His termination of a license that allowed for Venezuelan

oil exports to the U.S. and threats to drive Iranian oil exports

to zero all portend disruptions to global oil flows.

"It's a revolution in energy policy that is unfolding... The

industry is trying to catch its breath," said Dan Yergin, the

Pulitzer Prize-winning author and vice chairman of conference

organizer S&P Global, in an interview.

"I don't think there's ever been this amount of upheaval and

recalibration happening."

The energy industry's reset will be front and center at the

CERAWeek conference, where more than 8,000 delegates will meet.

Participants and speakers include U.S. Energy Secretary Chris

Wright, energy ministers from OPEC+ members Nigeria, Libya, and

Kazakhstan, and the CEOs of Saudi Aramco, Chevron ( CVX )

, Shell, BP and TotalEnergies.

Crude prices hit a three-year low below $70 a barrel this

week after the Organization of the Petroleum Exporting Countries

and its allies (OPEC+) agreed to go ahead with a planned April

output increase.

Even before that, lower oil prices in 2024 and rising costs

for equipment and services had squeezed energy companies. Big

Oil is under duress, as evidenced by sweeping job cuts and cuts

in investment.

Chevron ( CVX ), the No. 2 U.S. oil producer, said it will lay off

up to 9,000 employees, while oilfield services firm SLB

said they were cutting jobs as part of a restructuring.

Meanwhile, investor Elliott Investment Management built

large stakes in oil major BP and U.S. refiner Phillips 66

to push for radical action to transform their

performance.

Global oil demand growth has been tepid for the past year,

in part because China has so many new electric vehicles on the

road that its motor fuel demand has reached a plateau.

Refining profit margins have fallen, weighing heavily on oil

company results in 2024 and are expected to do so again in 2025.

U.S. crude exports could decline this year as retaliatory

Chinese tariffs bite.

"It's not A plus B equals C anymore. There are like nine

equations here. There are so many things going on at once that

you pull on a string, you don't know where the other end of the

string is going to be," said Dan Pickering, chief investment

officer at Pickering Energy Partners.

Liquefied natural gas (LNG) has been a bright spot in recent

months. The United States is already the world's largest LNG

exporter, and producers have plans for a massive expansion.

Trump's reversal of former President Joe Biden's halt on new

projects means producers are likely to start approving those

expansions soon.

Wright and Interior Secretary Doug Burgum toured Venture

Global's ( VG ) Plaquemines LNG export facility in Louisiana on

Thursday, touting American energy and natural gas. The company

is set to expand the plant's production capacity with an

additional investment of $18 billion.

CAUTIOUS PRODUCERS

Global benchmark Brent futures are expected to average

$74.50 a barrel this year and just $66.46 a barrel next year,

according to the U.S. Energy Information Administration (EIA),

down from over $80 a barrel last year.

In a lower price environment, there is little sign that oil

investment and output is going to grow. Oil companies are

focused on capital discipline, improving productivity and

shareholder returns, rather than drilling more.

"The costs are way higher and that affects the

profitability," said Josh Young, chief investment officer at

Bison Interests.

"You're starting to see producers hold back their capital.

It's the opposite of what the president wants."

Rising costs in aging shale fields are also a challenge.

U.S. oil output is set to grow 380,000 barrels per day this

year, much less than the million-bpd growth in some recent

years.

Producers, on average, are expected to grow 2025 output by

1% with capital expenditure set to fall 4%, according to Morgan

Stanley's research.

"Shareholders are saying capital discipline, return cash to

shareholders and then you have the most powerful man in the

world, saying, drill, baby, drill - I think you pay lip service

to the president, and you follow the wishes of the shareholder,"

Pickering said.