1Q26 Dallas Fed
It's always fun to read these things, particularly the comments. Everybody's oatmeal is all stirred up now because of Iran and $100 WTI.
My only dumbass roughneck comment about these comments is that generally speaking balance sheets are big train wrecks, most the tight oil sector is adding debt, still, after 15 years, and the sector's ability to ramp up is based on debt, how much of it is still available. Because they do NOT have vast sums of money, if they want to ramp up, they'll have to borrow baby, borrow.
And 2026 is an impairment year from SEC declines in usable oil prices for 2025. Or will that get dumped by Trump? Lenders are going to have to have enormous cajones to loan money to the shale sector given existing debt, poorer wells and the high probability between now and 2028 that oil prices will go DOWN, not up. The futures are already in backwardation.
I disagree. I think that oil and gas have suffered from underinvestment for the last 15 years. Futures are in backwardation now, but the fact that the only non-OPEC source of growth, the Permian, is in plateau/decline, means that OPEC will have great power over pricing as Permian production declines. ME oil is not infinite and neither is Russian, and depletion grinds onward worldwide.
In 2004, oil was locked in low prices, but the North Sea and Cantarell were plateauing. Prices went from 20 in 2004 to 140 in 2008. I think we are near to something like that happening, and there is nothing Trump can do about it.