Tariffs, Oversupply: Oil Industry Faces Imminent Global Contraction

The global oil industry anticipates a significant decline in exploration and production investments from 2025, amid persistent oversupply, exacerbated by increased U.S. tariffs and recent decisions by OPEC+.

Partagez:

The global oil sector is confronting major challenges as the current year reveals a contraction in exploration and production (E&P) spending. This reduction is taking place amid growing oversupply and trade tensions intensified by new tariff hikes between the United States and its major trading partners.

Global Oil Investments in Decline

The anticipated decrease in upstream global investments is primarily due to persistent oil oversupply. This situation has worsened following the recent announcement by the Organization of Petroleum Exporting Countries and its allies (OPEC+) to increase production quotas starting May 2025. The decision comes as newly imposed U.S. tariffs on essential materials for oil industries exacerbate production costs. Facing these uncertainties, oil companies are adopting a cautious stance, reducing their investment budgets.

Mixed Regional Performances

Despite this challenging global context, North America has shown relatively strong results, posting an annual revenue increase of 8%, driven mainly by the robust activity of the United States. In contrast, several international markets, notably Russia, Saudi Arabia, and Mexico, are experiencing significant downturns in oil activity. These regional difficulties have resulted in a 5% year-on-year decline in international revenues, highlighting a fragmented market where countries such as the United Arab Emirates, Kuwait, Argentina, and China continue to experience robust growth.

Tangible Impact of U.S. Tariffs

The increase in U.S. tariffs poses a major challenge for the sector, particularly affecting trade with China. The oil sector is significantly impacted by additional costs associated with imported raw materials intended for production systems. In response, international oil companies are intensifying efforts to optimize their supply chains to minimize financial impacts. Negotiations with customers are also underway to adjust contracts and pass these tariff increases onto final prices.

Digitalization and Revenue Diversification

Faced with these operational challenges, the oil industry is increasingly turning to digital services and artificial intelligence (AI) to enhance operational efficiency of existing installations. Investments in digitalization and cloud computing have become strategic for maintaining acceptable operational margins despite an unfavorable tariff environment. In parallel, the industry is expanding its portfolio into low-carbon activities, notably carbon capture and data center infrastructure, to diversify revenue streams.

These contextual factors invite sector players to continuously reassess their operational, financial, and technological strategies to remain competitive in a rapidly transforming market.

British company Prax Group has filed for insolvency, putting hundreds of jobs at its Lindsey oil site at risk, according to Sky News.
Orlen announces the definitive halt of its Russian oil purchases for the Czech Republic, marking the end of deliveries by Rosneft following the contract expiry, amid evolving logistics and diversification of regional supply sources.
Equinor and Shell launch Adura, a new joint venture consolidating their main offshore assets in the United Kingdom, aiming to secure energy supply with an expected production of over 140,000 barrels of oil equivalent per day.
Equinor announces a new oil discovery estimated at between 9 and 15 mn barrels at the Johan Castberg field in the Barents Sea, strengthening the reserve potential in Norway's northern region.
Sierra Leone relaunches an ambitious offshore exploration campaign, using a 3D seismic survey to evaluate up to 60 potential oil blocks before opening a new licensing round as early as next October.
Faced with recurrent shortages, Zambia is reorganising its fuel supply chain, notably issuing licences for operating new tanker trucks and service stations to enhance national energy security and reduce external dependence.
The closure of the Grangemouth refinery has triggered a record increase in UK oil inventories, highlighting growing dependence on imports and an expanding deficit in domestic refining capacity.
Mexco Energy Corporation reports an annual net profit of $1.71mn, up 27%, driven by increased hydrocarbon production despite persistently weak natural gas prices in the Permian Basin.
S&P Global Ratings lowers Ecopetrol's global rating to BB following Colombia's sovereign downgrade, while Moody’s Investors Service confirms the group's Ba1 rating with a stable outlook.
Shell group publicly clarifies it is neither considering discussions nor approaches for a potential takeover of its British rival BP, putting an end to recent media speculation about a possible merger between the two oil giants.
The anticipated increase in the tax deduction rate may encourage independent refineries in Shandong to restart fuel oil imports, compensating for limited crude oil import quotas.
Petro-Victory Energy Corp. starts drilling of the AND-5 well in the Potiguar Basin, Brazil, as the first phase of an operation financed through its strategic partnership with Azevedo & Travassos Energia.
The Texan Port of Corpus Christi has completed major widening and deepening work designed to accommodate more supertankers, thus strengthening its strategic position in the US market for crude oil and liquefied natural gas exports.
BP Prudhoe Bay Royalty Trust is offering its interest in Prudhoe Bay, North America’s largest oil field, as part of its planned dissolution, assisted by RedOaks Energy Advisors for this strategic asset transaction.
CNOOC Limited’s Hong Kong subsidiary and KazMunayGas have concluded a nine-year exploration and production contract covering nine hundred and fifty-eight square kilometres in Kazakhstan, sharing investment and operations equally.
Donald Trump announced that the United States will no longer oppose Chinese purchases of Iranian oil, immediately triggering a drop in global crude oil prices and profoundly reshaping international energy trade partnerships.
Research firm S&P Global Commodity Insights lifts its outlook for the fourth straight year, betting on three point five mn barrels per day from 2025 despite lower prices.
Enbridge plans to expand its infrastructure to increase oil transportation from the American Midwest to the Gulf Coast, anticipating rising exports and addressing current market logistical constraints.
US commercial crude inventories significantly decline by 3.1 million barrels, widely surpassing initial forecasts and immediately pushing international oil prices higher.
The UK could have hydrocarbon reserves twice as large as current official estimates, according to Offshore Energies UK, highlighting the impact of fiscal policies on forecasts and the economic future of the North Sea.