Tariffs and Oil Price Volatility: Global Producer Spending Set for Steep Decline
Summary
U.S. oilfield service provider Baker Hughes has forecast steeper drops in spending by global oil producers due to tariffs affecting demand expectations and pushing down crude prices. The company, which reported better-than-expected first-quarter earnings on Tuesday, now expects global upstream spending to decline significantly by 2025.
Global Oil Producers to Cut Spending Next Year
According to Baker Hughes’ forecast, global upstream spending is expected to be down in the high-single digits, with North American producer spending projected to plummet in the low-double digits. Internationally, spending will ease to mid-to-high single-digits compared to last year’s estimates.
Baker Hughes’ CEO Lorenzo Simonelli warned of multiple factors driving these declines, including uncertainty surrounding oil prices volatility and ongoing weak activity in markets such as U.S. lands. However, he noted that several other countries like Brazil, Middle East nations, and Asia Pacific are showing some recovery strength due to higher energy demand.
"Discretionary spending delays have continued right into the second quarter this year," Simonelli stated, highlighting ongoing concern over high uncertainty affecting investment in North America by global oil producers. Furthermore, recent crude price swings may temper upstream investments more so in particular countries like Saudi Arabia and Mexico compared with countries experiencing growth across Asia Pacific.
As well as low producer spending forecasts for next year, Baker Hughes also faces the negative impact of U.S. tariffs imposed upon Chinese goods among others. While working on recovering costs through other means like domestic sourcing or negotiating price increases with customers has alleviated this economic constraint only somewhat.
CEO Simonelli noted "we estimate our cost impacts at between $100 million and $200 million before interest, tax, depreciation and amortization."
Regarding liquefied natural gas (LNG) markets globally, demand remains strong amidst rising global energy consumption especially since U.S. President Trump relaxed restrictions on exporting permits last week.
Simonelli added that key clients were actively planning for projects beyond the year 2030 with LNG capacities above the projected total at end decade levels exceeding 800 million tonnes annum worldwide by decade’s close.
Tariffs and Oil Price Volatility: Global Producer Spending Set for Steep Decline
Summary
U.S. oilfield service provider Baker Hughes has forecast steeper drops in spending by global oil producers due to tariffs affecting demand expectations and pushing down crude prices. The company, which reported better-than-expected first-quarter earnings on Tuesday, now expects global upstream spending to decline significantly by 2025.
Global Oil Producers to Cut Spending Next Year
According to Baker Hughes’ forecast, global upstream spending is expected to be down in the high-single digits, with North American producer spending projected to plummet in the low-double digits. Internationally, spending will ease to mid-to-high single-digits compared to last year’s estimates.
Baker Hughes’ CEO Lorenzo Simonelli warned of multiple factors driving these declines, including uncertainty surrounding oil prices volatility and ongoing weak activity in markets such as U.S. lands. However, he noted that several other countries like Brazil, Middle East nations, and Asia Pacific are showing some recovery strength due to higher energy demand.
"Discretionary spending delays have continued right into the second quarter this year," Simonelli stated, highlighting ongoing concern over high uncertainty affecting investment in North America by global oil producers. Furthermore, recent crude price swings may temper upstream investments more so in particular countries like Saudi Arabia and Mexico compared with countries experiencing growth across Asia Pacific.
Tariff Impact Affects Baker Hughes’ Annual Earnings
As well as low producer spending forecasts for next year, Baker Hughes also faces the negative impact of U.S. tariffs imposed upon Chinese goods among others. While working on recovering costs through other means like domestic sourcing or negotiating price increases with customers has alleviated this economic constraint only somewhat.
CEO Simonelli noted "we estimate our cost impacts at between $100 million and $200 million before interest, tax, depreciation and amortization."
Regarding liquefied natural gas (LNG) markets globally, demand remains strong amidst rising global energy consumption especially since U.S. President Trump relaxed restrictions on exporting permits last week.
Simonelli added that key clients were actively planning for projects beyond the year 2030 with LNG capacities above the projected total at end decade levels exceeding 800 million tonnes annum worldwide by decade’s close.