Permits up, rigs down
President Trump promised to unleash American energy. One year in, permits are flowing, but oil is not.
WTI crude traded at $59.33 per barrel Wednesday, down 1.3% on the day. Brent slipped to $64.04. Both benchmarks remain stuck well below levels that make new drilling profitable for most US producers.
The disconnect tells a story the White House did not anticipate. The Bureau of Land Management has approved 6,106 applications for permits to drill since Trump took office, more than any fiscal year in 15 years. Interior Secretary Doug Burgum signed off on 63.7% more federal and Indian drilling permits compared to the Biden administration at the same point.
Yet the rig count tells a different story. Active drilling rigs in the US dropped 6% year-over-year, according to Baker Hughes data. Fewer rigs mean fewer new wells, regardless of how many permits sit in company filing cabinets.
The price problem
Oil companies drill when they can make money. Right now, many cannot.
"If economic conditions worsen, drilling and completion activities will cease in 2026," one executive told the Federal Reserve Bank of Dallas in its quarterly survey.
The math is straightforward. Breakeven costs in the Permian Basin, America's most prolific oil field, average between $62 and $65 per barrel depending on the operator, according to the Dallas Fed. With WTI hovering near $59, margins are thin to nonexistent for all but the most efficient drillers.
The EIA projects US crude production will average 13.6 million barrels per day in 2026, essentially flat compared to 2025. Output is expected to fall more sharply in 2027 (down 2%) as sustained low prices finally bite.
Oversupply looms
Global markets face a supply glut. The EIA forecasts inventory builds will average 2.8 million barrels per day through 2026, pushing Brent toward $56 and WTI toward $52 on average.
OPEC+ production restraint has not been enough to offset rising output from the US, Guyana, Brazil, and other non-OPEC producers. The cartel meets February 1 to reassess its strategy, but analysts expect no major policy shifts.
For American drillers, the irony is thick. More permits mean more potential supply. More supply means lower prices. Lower prices mean less drilling. The "drill baby drill" mantra runs headlong into market reality.
What to watch
Traders are eyeing several catalysts:
- The February 1 OPEC+ meeting for any signals on production changes
- Weekly EIA inventory reports for demand clues
- Permian Basin rig counts as a leading indicator of future supply
- Chinese demand data, which disappointed markets in recent months
Gasoline prices have dropped about 10% since Trump took office. Good news for consumers, bad news for producers hoping the White House energy agenda would lift their fortunes.