Despite high prices, U.S. oil producers aren’t coming to the rescue as mistrust and chaos affect the outlook. The’market is being manipulated’

(SeaPRwire) –   Despite a significant surge in crude oil prices presenting a lucrative opportunity, U.S. oil companies are hesitant to increase production in the immediate future due to prevailing uncertainty regarding the long-term market outlook.

A survey conducted by the Dallas Fed among oil and gas executives in the vital Permian Basin indicates that supply levels are expected to remain largely unchanged.

When questioned about anticipated increases in U.S. oil production in response to the conflict in Iran, 30% of respondents predicted no change for the current year. Another 43% foresaw a modest increase of up to 250,000 barrels per day, while 17% estimated an increase between 250,000 and 500,000 barrels per day. Only 1% anticipated an output increase exceeding 1 million barrels per day.

Looking ahead to 2027, the outlook is somewhat more optimistic, with 24% expecting no change in production, 26% anticipating an increase of 1 to 250,000 barrels per day, and 32% projecting a rise of 250,000 to 500,000 barrels per day. However, a mere 2% foresee an increase of over 1 million barrels per day.

For context, Goldman Sachs has estimated that crude oil output from the Persian Gulf has decreased by 14.5 million barrels per day, representing a 57% drop from pre-conflict levels.

The reluctance of U.S. companies to ramp up oil production occurs even as West Texas Intermediate futures have dramatically increased, climbing from $57 per barrel at the beginning of the year to a peak of $111 during the height of the conflict, and trading just under $100 in the past week.

The Dallas Fed survey findings align with a previous survey from last month, which revealed that half of exploration and production executives reported no change in the number of wells their companies plan to drill in 2026, with an additional 26% expecting only a slight increase.

Anonymous comments included in the latest report highlighted that the extreme price volatility experienced recently has generated significant uncertainty, negatively impacting capital spending intentions.

“Even after nearly a month of oil prices exceeding $90 per barrel, rig counts have declined, suggesting minimal confidence in price sustainability,” stated one respondent. “To bridge the supply gap created by the Iran conflict, greater certainty and higher projected prices for 2027 are necessary to encourage additional rig and frack deployments.”

Another executive commented, “Given all the chaos, forecasting anything in the energy sector is exceptionally challenging.”

Executives also appeared to allude to President Donald Trump’s tendency to use social media to influence energy prices downward and stock markets upward.

This comes as Wall Street has become a significant check on his policies, with previous market downturns prompting him to reconsider his most stringent tariff measures.

“The discrepancy between the fluctuations in paper market oil prices and what appear to be substantially higher physical prices sends mixed signals to operators who are unable to plan rig and capital budgets when prices swing wildly based on tweets,” an oil executive observed. “Our assessment is that the paper market is being manipulated. This will likely result in an even more severe imbalance in supply and demand and higher prices in the medium term (over the next 12 months).”

A respondent from the oilfield services sector expressed frustration, stating, “Uncertainty is detrimental to the oil and gas business, and this administration embodies uncertainty.”

A colleague echoed this sentiment, remarking, “The unpredictable nature of the current administration makes business modeling nearly impossible.”

Dallas Fed

With millions of barrels of oil held up in the Persian Gulf, a fleet of tankers from various global locations is en route to the Gulf of Mexico to load U.S. oil.

However, this influx will not be sufficient to compensate for the reduction in Middle Eastern supplies, and shortages are beginning to impact parts of Asia and Europe.

Energy experts have been cautioning that oil futures are disconnected from the realities of the physical market. Paul Sankey, president of Sankey Research, warned that a significant market correction is inevitable and imminent.

He pointed out that oil shipments from the Persian Gulf that were underway before the conflict have only recently reached their destinations. Consequently, with the Strait of Hormuz largely impassable for over 40 days, the absence of new supplies can no longer be overlooked.

As new supplies of Middle Eastern oil have ceased, countries are drawing down their reserves, and inventory levels have become “scary,” Sankey informed Bloomberg TV on Thursday.

He further warned that the situation is guaranteed to worsen, unlike typical oil market forecasts that can be inaccurate due to unforeseen factors.

“In this scenario, we can be certain that the next two months will be an ongoing, absolute disaster, even if the straits were to reopen tomorrow, because it is simply locked in by the logistics of tankers, and those tankers are all in the wrong locations,” Sankey explained.

Similarly, analysts at JPMorgan noted in a Tuesday report that commercial inventories in OECD countries are projected to reach “operational minimums” between May 9 and May 30, at which point “price increases become exponential rather than linear.”

Following the cessation of hostilities, the oil supply chain will require time to recover. Ports will take two months to reopen, and tanker crews will need two to three weeks to feel secure enough to transit the strait again. JPMorgan also estimated that restoring oil production to 99% of capacity would take four months.

Meanwhile, the Strait of Hormuz, through which one-fifth of the world’s oil and liquefied natural gas passed before the conflict, will likely be viewed differently going forward.

“The administration’s assertion of an ‘Iran terror premium’ existing for decades in crude oil pricing is preposterous,” an oil executive told the Dallas Fed. “However, the administration has now created such a premium where one did not previously exist.”