U.S. oilfield service firms are bracing for significant challenges amid shifting market dynamics. President Donald Trump’s tariffs are disrupting global supply chains, while plummeting oil prices further complicate matters for major players in the industry.
Reuters reports that the tariffs, combined with falling demand, are expected to significantly affect revenues and profits for key companies like SLB, Halliburton, and Baker Hughes.
With forecasts predicting a decline in oilfield revenues by 2025, these companies face an uncertain future. Experts predict further setbacks as the economic and geopolitical situation continues to evolve.
Impact on Key Materials and Operations
The tariffs are set to hit critical materials used in oil services, such as pipes, valve fittings, and sucker rods. These components are essential to oilfield operations and are typically sourced globally.
Ryan Hassler, Rystad Energy’s vice president of supply chain research, highlighted that companies like SLB, Halliburton, and Baker Hughes, which rely on multinational sourcing, are likely to feel the brunt of the tariff effects :
Pipes, valve fittings, sucker rods are going to be impacted by tariffs, which will be felt by the big three in particular where they have multi-national sourcing strategies.
Stock prices of the three major firms took a significant hit. SLB shares plummeted 12% to $34.60, their lowest point since September 2022, while Halliburton saw a 10% drop to just over $20, and Baker Hughes fell 11% to around $36.40.
The tariffs also coincide with a dramatic drop in oil prices. On Friday, Brent crude dropped to $64.03 a barrel, and WTI sank to $66.90, levels not seen since the COVID-19 pandemic.
These price declines are compounded by the escalation of trade tensions, especially with China, the world’s top crude importer, which has also imposed higher tariffs on U.S. goods.
Global Economic Uncertainty and Recession Risk
The downturn in oil prices and the trade war have investors worried about the future of global trade. JP Morgan has raised its forecast for the likelihood of a global recession by the end of the year, now predicting a 60% chance, up from the previous estimate of 40%. According to Tamas Varga, an analyst at PVM Oil Associates,
The curtain appears to be falling on global trade as we knew it, and the immediate future is worryingly uncertain…The threat of recession is front of mind, and investors are retreating from risk assets such as oil and equities.
If the WTI oil price remains below the $60 per barrel mark for a prolonged period, analysts predict that U.S. shale activity could significantly slow down in the second half of the year.
This could exacerbate the challenges faced by oilfield service firms as they navigate the combined impacts of trade tariffs and low oil prices.
