Fitch’s decision to change the 2025 outlook for the fossil fuel industry from “neutral” to “deteriorating” is based on global macroeconomic conditions, especially the early April double whammy of President Trump’s tariffs announcement and the decision of OPEC and key allies to churn out more crude oil volumes after years of self-imposed curtailments.

However, Fitch did highlight that most U.S. oil and gas companies should face limited impacts from the sector downgrade—as long as it’s shorter in duration—because they entered this period of volatility with stronger balance sheets on average, including less debt.

“There has been some tariff de-escalation,” Fitch said in its report, “however, uncertainty over where tariff rates will settle and the impact of those tariffs already implemented will remain key factors in our macroeconomic forecasts, leading to lower-than-previously-expected oil consumption increases.”

As OPEC, led by Saudi Arabia, and other countries, including Kazakhstan, Brazil, and Guyana, ramp up oil production, the world is simultaneously consuming less crude oil than previously expected. Fitch projects global oil demand will grow by about 800,000 barrels per day (bpd) this year, compared with previous expectations of more than 1 million barrels daily. “The market will remain oversupplied in 2025 due to faster supply growth.”

In a bit of odd timing, the Fitch report came out the same day that oil prices rose to their highest levels since early April on news of heightened military tensions between the U.S. and Iran, more optimistic economic inflationary data, and the U.S. and China reaching another temporary truce in their trade war. The U.S. benchmark for oil jumped to as high as $68 per barrel on June 11, up from recent lows of $58 in early May.

Also bullish are new estimates that OPEC may not increase their actual oil volumes by as much as they’re stating on paper. Part of Saudi Arabia’s push, after all, is to bring some nation’s, such as Iraq and Kazakhstan, into better compliance with the production quotas they regularly exceed.

“Overall, our estimates indicate that the actual flow of expert barrels is likely to be lower than announced production increases, which would lead to real impacts on the market,” said Priya Walia, vice president of oil commodity markets for analysis firm Rystad Energy.

As for the other main ratings agencies, in late May, S&P Global Ratings said it expects U.S. oil and gas producers to reduce aggregate capital spending by 5% to 10% in 2025 “amid global economic uncertainty and heightened oil price volatility, capital discipline, and ongoing efficiency gains.”

Of course, the third major credit ratings agency, Moody’s, famously joined S&P and Fitch in May by lowering the United States’ sovereign credit rating from the top “Aaa” level for the first time in more than 100 years with the tariff wars representing the final straw.

Federal forecast

The ratings agencies’ projections mesh with the U.S. Department of Energy’s own updated oil and gas forecasts.

The DOE’s short-term energy outlook released June 10 said U.S. crude oil production will finally enter a period of decline for the first time since the pandemic from a world-leading, all-time high of 13.5 million barrels a day in the second quarter of 2025.

The outlook forecasts U.S. volumes will fall to 13.3 million barrels daily by the end of 2026. That’s a relatively small decrease, but it represents a major milestone for the industry that is projected to not only plateau, but also shrink.

OPEC and its key allies, a group called OPEC+, already shocked oil markets in April—the same time Trump announced his new tariff policy—with pledges to raise production volumes by more than 2 million barrels per day by late 2025. Likewise, at the end of May, OPEC+ agreed to a third month of volume hikes in July.

“Crude oil prices fell for the fourth consecutive month in May, driven by rising global oil inventories that have resulted from slowing global oil demand growth and the accelerated unwinding of OPEC+ voluntary production cuts, which began in April,” the DOE report added.

Collectively, OPEC+ has taken 5.86 million barrels of oil per day offline since 2022 until this year—more than 5% of global demand—to help strengthen oil markets, partly in response to rising U.S. production and because of slowing global demand growth.

Meanwhile, the U.S. was growing from producing 8.8 million barrels of oil a day at the beginning of 2017 to its new high of 13.5 million barrels daily in 2025, a whopping increase of more than 50%.

These DOE and credit rating reports all follow a first-quarter earnings season in which oil and gas CEOs bemoaned the economic turmoil and weak oil price environment, but only announced relatively limited budget reductions.

A bellwether for the industry as the top producer focused on the Permian Basin, Diamondback Energy chairman Travis Stice said the U.S. industry was already in a state of decline.

“We believe we are at a tipping point for U.S. oil production at current commodity prices,” Stice said in a needle-moving shareholder letter in May. “As a result of these activity cuts, it is likely that U.S. onshore oil production has peaked and will begin to decline this quarter.”