President Trump’s tariffs are creating some uncertainty in the United States oil and gas market and resulting in a price drop.
Brent crude futures were trading at $69.90 per barrel on Thursday, the same day that Trump announced his sweeping tariffs, while West Texas Intermediate futures were at about $66, both down around 7%.
Rey “R.T.” Trevino, Director of Operations at Pecos Country Operating, said the tariffs have brought uncertainty in the U.S. market which have led to a drop in oil prices.
“We do feel that prices are going to at some point stabilize, but right now, this is really two different waves that are colliding with each other,” Trevino said about Trump’s tariffs and OPEC+.
OPEC and its allies are now speeding up their plans to increase output. About a month ago, OPEC announced that it would be adding an additional 2.2 million barrels per day over the next 18 months. Trevino sees that as an extraordinary measure.
“Over the next 18 months, they’re going to add about an additional 150,000 barrels of oil each month to the market,” he said.
On Thursday, the Organization of the Petroleum Exporting Countries and allies (OPEC+), a group led by Saudi Arabia and Russia, said that it would add 411,000 barrels a day to the market starting next month. OPEC+ is trying to form an organization just as powerful as OPEC.
According to Trevino, there is some infighting going on between OPEC and OPEC+.
“They don’t like the fact that OPEC has come out and said that we’re going to increase,” Trevino said about the OPEC+ countries. “There has probably been more production from some of the smaller countries in OPEC than they should’ve been doing for a while.”
On top of that, Trevino said Saudi Arabia, whom President Trump appears to have a good relationship with, is trying to lower the price of oil to force other OPEC countries to abide by the cuts that OPEC had put in place.
“I think that tariffs and this OPEC+ wave of lowering the price of oil just happened to basically be two giant waves that have collided at the same time,” said Trevino.
So, what does this mean for the consumer and gas prices? Trevino said gas price movement comes after the price of oil is lowered.
“Once the refineries are buying the oil at this lowered price, then they will sell their refined products to the gasoline vendors at that price,” Trevino added. “We’ll see the lower prices in the next three to four weeks.”
The United States is still the number one producer of oil in the world at 14 million barrels of oil per day.
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