Oil Production Stalls While Prices Skyrocket

The Dallas Fed asked oil leaders how they would react to the war in Iran. Most said U. S. output will stay flat this year. Only a few expect a rise of up to half a million barrels per day. Only 1 % think production could jump over a million barrels daily. In 2027 the outlook is slightly better. A quarter of respondents see no change, a third expect an increase of 250‑500 k barrels per day. Still, only 2 % think it will rise over a million. Goldman Sachs reports that Gulf oil output has dropped 57 % since the war began. Yet West Texas Intermediate futures climbed from $57 to $111 a barrel at the height of the conflict and stayed near $100 recently. The survey also shows that half of companies plan no new wells for 2026, and a quarter see only a small rise. Price swings have made firms unsure about spending on rigs and fracking. One executive said: “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. ” Some leaders blame President Trump’s tweets for confusing the market. They say paper prices move wildly while physical prices stay high, making it hard to plan budgets.An oil‑field services manager complained that the current administration creates too much uncertainty. A peer echoed that business modeling is nearly impossible. Because Gulf supplies are low, tankers from around the world are heading to the Gulf of Mexico for U. S. oil. But this will not fully replace the missing Middle‑East barrels, and shortages appear in Asia and Europe. Experts warn that futures are out of sync with real supply. Paul Sankey says the closed Strait of Hormuz has stopped new shipments for over 40 days. He warns that inventories are “scary” and the situation will worsen for at least two months, even if the strait reopens. JPMorgan notes that commercial stocks in OECD countries will reach minimum levels between May 9 and 30. After that, prices could rise sharply. They estimate it will take two months for ports to reopen and four months for production to return to 99 % capacity. The Strait of Hormuz, once a vital route for one‑fifth of global oil and LNG, will not be seen the same way again. An oil chief called the administration’s claim of an “Iran terror premium” laughable, noting that it did not exist before the war.