U.S. crude oil prices briefly fell below the critical $60 per barrel mark on Monday, driven by fears over tariffs and a potential economic slowdown. This marks the first time in four years that the price of front-month NYMEX WTI oil dropped below this level, reaching its lowest point since April 2021, when the pandemic was still in full swing. However, the prices rebounded to $60.70 per barrel by the afternoon.
The sharp drop in prices is mainly attributed to concerns about tariffs under the Trump administration, but global demand issues had already been escalating in recent months. The situation was further complicated last week when OPEC made an unexpected move to increase oil production.
Energy analysts view the $60 per barrel price as a critical threshold, beyond which oil producers may begin to scale back operations, potentially leading to a reduction in production. Earlier in April, oil prices were above $70 per barrel.
“At $60, the U.S. will slow down its production. There’s no doubt about it,” said Marshall Adkins, head of energy for Raymond James. “Production will decline, but it won’t happen immediately.”
Adkins further emphasized the uncertainty in the market: “We’ve just been hit with a shock. We’re still trying to figure out what comes next. The word of the day is uncertainty.”
Currently, the U.S. produces about 13.6 million barrels of crude oil daily, up from 11.3 million barrels per day in April 2021, according to the U.S. Energy Information Administration. Since the pandemic, the U.S. oil industry has mostly balanced growth and stability without any significant setbacks, but now, concerns are mounting.
Analysts say that prices falling to $60 per barrel will lead to cuts in production, but a price drop to $50 per barrel would be disastrous for the industry. Adkins noted that significant growth in drilling activity is unlikely unless oil prices rise above $85 per barrel.
Research firm Rystad Energy estimates that the breakeven price for U.S. oil production is around $62 per barrel. Matthew Bernstein, a vice president at Rystad, warned that any slowdown in production from the Permian Basin, the country’s most prolific oil-producing region, could significantly slow down the growth rate of U.S. oil production in 2025 if prices remain low.
Gabriele Sorbara, managing director at Siebert Williams Shank & Co., noted that many oil producers are likely to take a cautious “wait-and-see” approach regarding tariffs. They will monitor whether the tariffs hold and how the markets react before making any major decisions.
While the industry is not likely to come to a standstill, companies will likely reduce drilling activities or slow down production. Sorbara explained that companies may continue drilling wells at a slower pace, but refrain from completing or bringing them online until prices recover.
“Companies will try to maintain their momentum,” Sorbara said. “They want to hold onto their rigs and fracking crews if they’re operating efficiently.”
For companies with extra cash, stock buybacks may be a priority over additional drilling. Those in a weaker financial position may pull back on both buybacks and dividends while also cutting back on drilling.
Natural Gas and Gasoline Prices
While oil prices have been highly volatile, natural gas prices have remained relatively stable. Sorbara compared the difference between the two commodities, saying, “You won’t stop using electricity, but you might drive less.”
The main concern for natural gas producers is whether tariffs will affect the technology sector enough to slow down the data-center construction boom, which has been a significant driver of natural gas demand.
As for gasoline, prices typically peak in April due to refinery maintenance in preparation for the busy summer driving season. However, with oil prices falling, it looks like fuel prices may soon begin to drop as well. Patrick DeHaan, head of petroleum fuel analysis at GasBuddy, noted, “There are more drops to come. Tariffs are the main driver of fuel price changes right now.”
The national average price for regular unleaded gasoline was $3.21 per gallon before markets opened on April 7. If crude prices stay low or continue to fall, gasoline prices could drop below $3 per gallon as early as May. The last time the national average was below $3 for more than two days was in May 2021.
Former President Trump has long advocated for lower fuel prices and has repeatedly cited the $3 per gallon threshold. In response to the market’s fall on Monday, he posted on social media: “Oil prices are down, interest rates are down (the slow-moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long-time abused USA is bringing in billions of dollars a week from the abusing countries on Tariffs that are already in place.”
DeHaan cautioned, however, that lower fuel prices may not always be a positive sign. “Trump wants cheap gasoline, but cheap gasoline often means the economy is under pressure,” he said.
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