Oil Production Stalls While Prices Skyrocket

The Dallas Federal Reserve recently surveyed oil industry leaders to gauge how they would respond to the ongoing war in Iran. The findings paint a picture of cautious optimism for 2024, tempered by uncertainty about future production and pricing.

2024 Outlook

Most respondents expect U.S. oil output to remain flat this year.
Only a handful foresee an increase of up to ½ million barrels per day (bpd).
A mere 1 % think production could surge over 1 million bpd.

2027 Forecast

25 % of respondents see no change in output.
33 % anticipate a modest rise of 250–500 k bpd.
Still, only 2 % predict a jump over 1 million bpd.

Gulf Production Decline

Goldman Sachs reports that Gulf oil output has fallen 57 % since the conflict began. Despite this, West Texas Intermediate (WTI) futures spiked from $57 to $111 a barrel at the conflict’s peak and have hovered near $100 recently.

Investment Ambiguity

Half of companies plan no new wells in 2026; a quarter foresee only a small increase.
Price volatility has left firms unsure about investing in rigs and fracking.
One executive noted:
> “Rig counts fell even though oil stayed above $90 a barrel. We need stable prices and higher 2027 futures to justify more drilling.”
Another added:
> “Predicting anything in energy is hard right now.”

Political and Market Confusion

Some leaders blame President Trump’s tweets for market confusion.
They argue that paper prices swing wildly while physical prices remain high, complicating budget planning.
An oil‑field services manager complained that the current administration creates too much uncertainty, a sentiment echoed by peers.

Supply Chain Shifts

With Gulf supplies low, tankers worldwide are diverting to the Gulf of Mexico for U.S. oil. However, this cannot fully replace missing Middle‑East barrels, leading to shortages in Asia and Europe.

Expert Warnings

Paul Sankey warns that the closed Strait of Hormuz has halted new shipments for over 40 days. He describes inventories as “scary” and predicts worsening conditions for at least two months, even if the strait reopens.
JPMorgan estimates that commercial stocks in OECD countries will hit minimum levels between May 9 and 30, after which prices could rise sharply. They project:
2 months for ports to reopen.
4 months for production to return to 99 % capacity.

The Strait of Hormuz, once a vital route for one‑fifth of global oil and LNG, may never regain its former status.

An oil chief dismissed the administration’s claim of an “Iran terror premium” as laughable, noting that it did not exist before the war.