By Craig Mellow
President Donald Trump isn't the only one who wants to drill, baby, drill.
Left-leaning Brazilian President Luiz Inácio Lula da Silva, better known for hugging the rainforest, just greenlit oil exploration at the mouth of the Amazon.
Ideological antipode Javier Milei of Argentina lately inked a deal with Italy's Eni to export liquefied natural gas from the vast Vaca Muerta shale deposit. Nigerian President Bola Ahmed Tinubu called out the army to fight the pipeline siphoning that has devastated his country's crude exports.
Surging production globally will yield a surplus of eight million barrels a day as oil demand peaks around 2030, the International Energy Agency predicts. That could be an obstacle to the U.S. president's oft-repeated plans for "energy dominance."
"Marginal producers in the U.S. are at risk with prices below $70 a barrel," says Jacob Mandel, research lead at Aurora Energy Research. "At least a few million barrels a day fit in that category." U.S. benchmark West Texas Intermediate currently trades around $67.
Brazil is the rising power in world oil thanks to its giant "pre-salt" fields, unique offshore deposits left behind when South America and Africa separated. Production, which was less than three million barrels a day in 2022, should hit 4.5 million by 2030, says Monique Greco, head of oil & gas research at Itau BBA.
Break-even cost for the pre-salt gushers is around $35 a barrel, she estimates. Lula is looking to the Amazon Basin when pre-salt tapers off in the next decade.
Shares in national oil company Petróleo Brasileiro look undervalued given these hot prospects and an underrated management, Greco adds.
"Petrobras trades at a discount because of perceived risks of government influence," she says. "We take a more benign view."
Argentina is the sleeping giant of global oil, or one of them. Vaca Muerta is a nearly virgin formation with similar potential to the U.S. Permian Basin. Chevron and Shell joined a consortium late last year to build a $3 billion pipeline to coastal export terminals, with capacity up to 900,00 barrels a day.
"Pipeline infrastructure has been the main bottleneck there," notes Patrick Gibson, research director for global oil supply at Wood Mackenzie.
Nigeria is an oil wild card. Tinubu's crackdown on bandits who "tap" the African giant's remote pipeline network has already lifted output to 1.5 million barrels a day, from about one million two years ago.
Global majors like Shell and TotalEnergies have divested assets to local players like Seplat Energy, which "understand local issues better," says Pranav Joshi, who covers Africa for Rystad Energy. Seplat's shares have nearly doubled in the past two years.
Further output increases may come tougher for Nigeria, though, Joshi thinks. "We need to see some execution evidence to go beyond 1.6 million barrels," he says.
OPEC, which still pumps 40% of the world's oil, looks more interested in protecting market share than propping prices at the moment, says Simon Henderson, director of Gulf and energy policy at the Washington Institute.
The cartel is tipping a second straight 411,000 barrel-per-day increase at its July 6 meeting, despite a 20% price drop over the past year. "The most likely candidate to be cut in the market is the U.S.," Henderson notes.
Multiyear oil market forecasts are imprecise at best, Woodmac's Gibson cautions, hinging on variables such as electric vehicle expansion and Chinese industrial demand.
The world isn't waiting for U.S. oilmen to name their price, though.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 03, 2025 10:51 ET (14:51 GMT)
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