To identify the supportive element of the oil complex, one simply needs to look at yesterday’s settlement prices. The daily changes, all in cents per barrel, are telling indeed: WTI -1, Brent +11, RBOB -70, Heating Oil +207, and Gasoil +174 (due to its earlier settlement; otherwise, it would have outperformed CME Heating Oil). As the successful Ukrainian campaign against Russian oil infrastructure continues almost unabated, the latest targets being the ports of Novorossiysk and Tuapse, the invader has been forced to halt its diesel exports until the end of the year. This provides a semi-reliable timeline for how long support from the middle of the barrel, which has sent crack spreads soaring and narrowed sweet–sour crude differentials, might last.

The geopolitical risk premium, which has been steadily building over the last two months as Ukrainian drone strikes intensified, has now materialised into an actual supply shortage, much to the detriment of Europe, which is structurally short of distillates.

No doubt, these spreads will reverse once distillate support fades, but several other factors will influence the flat price reaction. The potential resumption of oil exports from Kurdistan could exert both absolute and relative pressure on crude prices, as could developments in the financial sphere. A looming US government shutdown may trigger investor uncertainty, while yesterday’s encouraging economic data, including an upward revision to US 2Q GDP growth and a decline in weekly jobless claims, might compel the Fed to reconsider its stated path of further rate cuts, or at least slow the pace anticipated by the market. US import tariffs, both those already imposed and the ones unveiled overnight on branded drugs, heavy-duty trucks, and kitchen cabinets, will inevitably dent investor optimism.

There is nothing unusual about the myriad moving parts that push prices up and down daily. What has been constant over the past two months, however, is distillate resilience, which has unequivocally prevented oil prices from collapsing.

When Politics Intervene

Not only is the US the largest consumer of oil globally, but no country, including traditional producers, can match its might when it comes to pumping the black stuff out of the ground or from the depths of the ocean. The incumbent US administration’s plan for ‘energy dominance’ partly rests on the tenet of increasing oil production by 3 mbpd by the end of the current term. Consequently, federal lands have been opened for oil and gas leasing in the name of an ‘energy emergency’.
         
Reaching the ultimate objective of ramping up oil output by 3 mbpd is more than an ostensible or dubious undertaking. It will not happen. In a Trumpian world, where everything is ‘big’ and ‘beautiful’, facts are often sidelined or ignored. US (and global) oil production is chiefly a function of price. As producers are primarily responsible for the wealth of their shareholders, they will be reluctant to pump oil at full throttle when prices hover near break-even. The current environment, therefore, is anything but auspicious for a production increase, yet the US has proven remarkably able in weathering challenges precipitated by comparatively low oil prices.
           
The latest weekly data from the EIA puts US crude oil production just over 13.5 mbpd, close to the highest weekly reading of 13.63 mbpd recorded last December. The year-to-date mean of weekly figures is 13.44 mbpd, 180,000 bpd above last year’s average and 850,000 bpd higher than in 2023. The latest monthly EIA data, covering January–June, places output for 1H 2025 at 13.39 mbpd,160,000 bpd higher than the full-year 2024 average.
       
The EIA predicts annual growth of 210,000 bpd this year, with output averaging 13.44 mbpd. Whilst it is forecast to fall back to 13.30 mbpd in 2026, it will still resolutely remain above the 13 mbpd milestone. The sharp fall in US rig counts, from well over 600 in 2023 to close to 400 this year, which was once considered a harbinger of future US oil production, can no longer be relied upon because of technological advances. While these improvements will be unable to fully offset the shortfall in rig counts going forward, and although the marginal cost of US supply is projected to rise from $70/bbl today to $95/bbl by the mid-2030s (according to Enverus Intelligence Research), the fact remains that current US crude oil output is historically high and stable.
              
It is against this backdrop that the updated quarterly Dallas Fed Energy Survey was released on Wednesday. Data were collected between September 10 and 18 from 193 energy firms in Texas, northern Louisiana, and southern New Mexico. Although the geographic scope is relatively limited, the survey is considered a reliable reflection of the US oil landscape, hence its outsized influence in shaping investors’ thinking.

The trend across all the 2025 surveys is one of deteriorating views and prospects. Activity in the oil and gas sector declined in 3Q, business activity remained negative, and the outlook index reflected persistent pessimism, with respondents citing rising costs. WTI price expectations were pegged at $63/bbl for the next six months and $64/bbl for the next year.
              
The anonymous comment section of the report offers perhaps the most vivid description of the current state of the US shale segment:
    
“The noise and chaos is deafening! Who wants to make a business decision in this unstable environment?”

“The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch. Those who can are running for the exits.”

“Day-to-day changes to energy policy are no way for us to win as a country. Investors (rightly) avoid investing in energy (of all types, now) because of the volatility of underlying business results as well as the ‘stroke of the pen’ risk that the federal government wields in relation to long-duration energy developments.”

The executives’ mood is ominous. Yet, as outlined above, oil production remains stable. So, should one reasonably expect an imminent or gradual fall, or even a contraction in production growth, or will the industry once again adapt as it has many times in the past? The answer is ambiguous and perhaps even irrelevant.

One of the key takeaways from the survey is the growing, and indeed very palpable, dissent towards the administration’s “Quod licet Iovi, non licet bovi” style of policymaking. This double standard characterises every political elite, but the current one may have perfected it to a frightening degree. According to shale executives, and as implied in the survey, it undermines their industry. Therefore, there is little reason to believe that other business potentates, however quiet they choose, or are forced, to remain, see things differently. This is perhaps the most worrying aspect of the poll. Politics and economics are inextricably linked, but when the former captures the latter and the fragile balance between the two is brutally manipulated, it is the whole economy that ultimately pays the price.         

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