Dower Dallas
J.R Ewing aint happy
In this report: Dallas Fed Energy Quarterly survey, why its important, Tariff impacts on oil production, break even prices, Trade charts and commitment of traders report update for WTI.
Welcome to the oil land. Where perrrforrming brain surgery is easier. It is my view that the upside pullback we have seen over the last week has been on tentative volume and can unwind very easily.
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Macro
I remember growing up in the 80s, my mum loved tuning in weekly to Dallas with Larry Hagman playing the infamous J.R Ewing of Ewing oil. It was great. I got a little into it myself. The dastardly J.R was willing to sell his own mother for a good deal while his brother Bobby (my mums favorite smoke-show) was the counter balance good guy. The Ewings were oil men through and through. I wonder how they would have responded to the latest quarterly Dallas Fed energy survey
Why is this important?
If there will be a stalling of the US oil production industry, we will see it show up here first. We are looking for this as a core sentiment area and how the 'Drill baby, drill' idea is a farse-see below. If anything, we are monitoring for not only a flattening of production but an actual decline. It is my view from 2 weeks ago that the market balanced down into a lower range which it has now moved back to the high of. Oil may have been too cheap on the basis of current production dynamics and cost bases. Lets look at that.
Steel and Aluminum Tariffs
Date Implemented: March 12, 2025. All Countries: 25% tariff on steel and aluminum imports.
Rationale: The administration stated that these tariffs were intended to bolster domestic steel and aluminum industries by making foreign metals more expensive.
Of O&G services firms, 43% reported decreased operating margins for Q1 YOY while 33.3% reported no change and 23.1% reported an increase. It is easy to see one of the reasons for this hit to op margins is the price of steel. 25% tariffs as spoken about above have severely impacted the sector.
We can see above the operating expense price per barrel in US is currently around $45. Market is at WTI $68's. This just covers costs. Refer to stell tariffs impact below
