President Donald Trump is rooting for oil prices to fall even further after a stunning plunge over the last seven weeks. The U.S. oil and gas industry, a pillar of Trump’s political base, is likely less enthusiastic.
This year’s oil prices rally has swiftly collapsed as fears of potential oil shortages give way to forecasts that crude supply will swamp demand next year. The sell-off is pushing U.S. crude prices to levels that may impact drillers’ spending plans and their ability to return cash to shareholders.
“Exxon, Chevron, BP will survive because they are so big, but some of the smaller companies might have problems as costs are rising and revenue is falling,” said Andrew Lipow, president of Lipow Oil Associates.
U.S. crude futures tumbled from a nearly four-year high at $76.90 on Oct. 3 to a more than one-year low at $50.53 on Friday. From peak to trough, U.S. crude has lost more than a third of its value.
Oil’s drop below $55 earlier this week was apparently not enough for Trump. On Wednesday, the president took to Twitter to praise Saudi Arabia for hiking output and helping to cap oil prices. Trump implored the kingdom to keep at it, saying “let’s go lower!”
Trump sent the tweet one day after he declared his support for Saudi Arabia, shrugging off bipartisan calls to punish the kingdom after Saudi agents murdered journalist and U.S. resident Jamal Khashoggi last month. The CIA has reportedly concluded Saudi Crown Prince Mohammed bin Salman ordered the killing, but Trump has been casting doubt on that assessment throughout the week.
The president’s defense of Saudi Arabia comes about two weeks before a critical OPEC meeting on Dec. 6. Trump wants the Saudi-led group to keep pumping at full tilt, which would keep a lid on oil prices.
In recent weeks, the 15-nation OPEC cartel and several other exporters have signaled that they will agree to a price-boosting output cut. But Trump’s overtures to the Saudis could make it more difficult for the kingdom to support throttling back output.
“It looks like they’re going to be backing off on that,” John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC’s “Squawk Box” on Wednesday. “Our relationship with them appears to be bought and paid for now, and the oil market’s MVP, President Trump, is helping to keep a lid on prices.”