US oil service firms set for hit from Trump tariffs, tumbling oil prices

The tariffs and China's response raise fears of a global recession, with oil prices plummeting further, potentially reducing US shale activity.

<p>Trump introduced reciprocal tariffs on Wednesday, implementing a 10% baseline duty on most US imports, with some countries, including China, facing significantly higher levies.</p> — Trump introduced reciprocal tariffs on Wednesday, implementing a 10% baseline duty on most US imports, with some countries, including China, facing significantly higher levies.

US oilfield service firms are bracing for a hit as President Donald Trump's tariffs throw supply chains into disarray and tumbling oil prices set the stage for a drop in drilling activity, analysts and financial firms said on Friday. Financial services firm Morningstar lowered its fair value estimates for the big three oilfield service firms, SLB, Halliburton, and Baker Hughes, by 3-6% following Trump's tariff announcement on Wednesday. Those firms could see a 2-3% dip in oilfield revenue in 2025. For each dollar lost in revenue, Morningstar estimates the big three could see $1.25-$1.35 in lost operating profit. "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," said Rystad Energy's vice president of supply chain research, Ryan Hassler. Shares of SLB, the world's largest oil services firm, sank 12% on Friday to $34.60, its lowest since September 2022, according to data from LSEG. Halliburton stock slumped 10% to just over $20, and Baker Hughes tumbled 11% to around $36.40. Trump introduced reciprocal tariffs on Wednesday, implementing a 10% baseline duty on most US imports, with some countries, including China, facing significantly higher levies.

Oil prices slumped on Friday after China, the world's top crude importer, ramped up tariffs on US goods, in the most serious escalation in a global trade war that has investors worried about a recession, and a subsequent dip in oil demand.

Crude oil futures, down by more than 8% in afternoon trading, were heading for their lowest close since the middle of the COVID-19 pandemic in 2021. Global benchmark Brent crude tumbled as low as $64.03 a barrel while US West Texas Intermediate crude (WTI) hit a low of $66.90.

If a lower $60 per barrel range for WTI holds for a sustained period, activity in the US shale space could decline towards the second half of the year, Rystad's Hassler said. Investment bank JP Morgan said it now sees a 60% chance of the global economy entering recession by year-end, up from 40% previously. "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," said Tamas Varga, analyst at PVM Oil Associates.