Sinolink: The new US policies may increase oil and gas extraction, putting pressure on oil prices but the impact will be limited.

Sinolink released a research report stating that as the world's largest crude oil producer, the United States' government policies have a significant impact on oil prices, and they have been in a downward trend for a long time. However, the threshold at which oil prices bottom out depends on the concessions that oil companies can bear. It is recommended to continue to focus on oil investment targets with low production costs, good fundamentals, and strong international competitiveness. Event: On January 20th, local time in the United States, President Trump delivered his inaugural speech in Washington. In his speech, Trump announced that the country was entering a state of energy emergency, aiming to lower energy prices, use the US oil reserves to fill the national reserve, and promote US oil exports. On the other hand, Trump stated that he would end the green energy policy, revoke the mandate for electric vehicles, and save the US automobile industry. Sinolink's main points are as follows: - US shale oil production has high fixed costs and weak international market competitiveness. - Western oil companies are the companies with the highest domestic oil production in the United States. In 2023, their domestic oil production will reach 1000 thousand barrels per day, with 58% of crude oil production coming from the Permian, a major shale oil producing region in the US. Western oil companies' data can better reflect US shale oil production data. - According to the financial data of Western oil companies in 2023, the company's barrel oil production cost in the US is about $36.97 per barrel, while Saudi Aramco's barrel oil production cost in 2023 is only $24.46 per barrel. The major cost components influenced by objective factors such as geological reserves and extraction difficulty include barrel oil operating expenses and barrel oil depreciation. - The barrel oil operating expenses and barrel oil depreciation of Western oil companies are $12.95 per barrel and $15.22 per barrel, while Saudi Aramco's costs are only $5.52 per barrel and $2.80 per barrel. The remaining cost components are barrel oil taxes and sales management expenses, which vary by region, and have a larger elasticity compared to operating expenses and depreciation. - Even though Saudi Aramco's barrel oil taxes amount to $13.26 per barrel, while Western oil companies only have $2.63 per barrel, this means that the fixed costs of US shale oil production are nearly $20 per barrel lower compared to the Middle East, making US shale oil less competitive in terms of export from a cost perspective. Policy-driven production growth in the largest oil-producing countries may limit the decline in oil prices due to marginal costs. Since the US shale oil revolution, US crude oil production has rapidly increased, making it the world's largest crude oil producer. In 2023, US crude oil production reached 19,358 thousand barrels per day, accounting for 20.1% of the total global crude oil production, far exceeding Saudi Arabia's annual production of 11,389 thousand barrels per day. The Trump administration's series of policies to increase production, lower energy prices, and promote oil exports undoubtedly signal an increase in supply for the US and the international oil market, which could lead to a prolonged period of downward oil prices due to supply shocks. In other words, lowering oil prices is the policy goal of the Trump administration to deal with higher inflation in the US, and to benefit the US automobile industry, fulfilling its initial campaign promises. Therefore, the future decline in oil prices may be significant, but the downside is limited. According to the financial data of Western oil companies, the marginal cost of a barrel of oil in 2023 reached $62.86 per barrel, and since oil taxes are somewhat influenced by oil prices, fitting historical data of Western oil companies and calculating the breakeven sales price and marginal cost yields $55.57 per barrel. Considering that smaller domestic oil companies in the US have relatively higher marginal costs, a price below $60 per barrel would largely harm the interests of these oil companies, making the future bottom oil price a result of the mutual constraints and games between oil company interests and government political goals. Therefore, the Trump administration's energy policies may lead to a long period of downward oil prices, but the threshold at which oil prices bottom out depends on the concessions that oil companies can bear. Therefore, an oil price of around $65 per barrel is possible as a potential bottom price. Risk warning: Rapid changes in international politics, escalation of geopolitical conflicts, and changes in the supply and demand structure of crude oil.