Cailian Press, August 14th (Editor Zhao Hao)
U.S. shale oil producers are idling drilling rigs and cutting expenses to cope with the plunge in oil prices triggered by OPEC’s increased production, a shock that could lead to a significant decline in U.S. oil output.
Last week, the number of hydraulic fracturing teams for shale oil and gas wells, an important indicator of industry activity in the U.S., dropped to its lowest level in four years. Producers have also cut their capital expenditure plans by about $1.8 billion within just two quarters.
This week, the U.S. Energy Information Administration (EIA) forecasts that U.S. oil production will decrease next year due to the possibility of WTI crude oil prices dropping to $47.77 per barrel, nearly $20 below the break-even price for shale drillers.
Executives from shale oil companies say they are engaging in a new “price war” with Saudi Arabia, Russia, and other OPEC member countries—a move that threatens President Trump’s goal of increasing crude oil production in the country.
Kirk Edwards, CEO of Texas-based Latigo Petroleum Company, told the media, “The government doesn’t understand that we’ve shifted from ‘Drill, baby, drill’ to ‘Wait a minute, baby, wait’.”
“Until prices rebound and stabilize at around $75 per barrel, we won’t increase our drilling rig count. This fall and into 2026, U.S. production is expected to start declining.”
Over the past 20 years, the surge in shale oil production has made the U.S. one of the world’s largest oil and gas producers, but its high production costs make it more vulnerable to fluctuations in oil prices.
Scott D. Sheffield, former CEO of Pioneer Natural Resources and now an executive at ExxonMobil, commented on OPEC’s best strategy for capturing market share: “OPEC’s best way to maintain market share is to keep oil prices at the $60 range for an extended period.”
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“This will reduce investment in U.S. shale oil, Canada, Brazil, and the global exploration sector… It will force industry consolidation.”
The day before yesterday, the International Energy Agency (IEA) released a report predicting that by 2025 and 2026, global oil supply growth would exceed demand growth, potentially leading to further market imbalances.
Since April 1st, WTI crude oil prices have fallen nearly 13%, closing at $62.21 per barrel on Wednesday, below the $65 price required for shale oil producers to break even as per the quarterly survey conducted by the Dallas Fed.
In Texas, the largest oil-producing state in the U.S., concerns over the potential impact of Middle Eastern turmoil on global oil production have shifted to anxiety about an oversupply.
OPEC has increased its production since April, planning to add more than 2 million barrels per day—equivalent to Germany’s total consumption. At the meeting earlier this month, the organization agreed to continue increasing production in September.
Francisco Blanch, head of global commodities and derivatives research at Bank of America Merrill Lynch, stated that Saudi Arabia, with low extraction costs, is targeting U.S. higher-cost shale oil producers.
“Saudi Arabia is pushing OPEC to increase production to regain market share it has lost to U.S. shale oil,” he predicted, expecting this to be a “long and relatively mild price war.”
The EIA reported that U.S. crude oil daily production will reach a new historical high of 13.6 million barrels this year, but it will drop to 13.1 million barrels by December 2026. This could be the first annual decline in U.S. production since the COVID-19 pandemic period, according to data from energy data company Enverus.
According to statistics from Enverus, aside from superpowers like ExxonMobil and Chevron, the top 20 largest U.S. shale oil producers have cut their capital expenditure budgets for 2025 by approximately $1.8 billion in the past two quarters.
Investment bank TD Cowen stated that the capital expenditure of shale oil companies in 2025 will be reduced by 4% compared to 2024.
Companies are also striving to improve efficiency, speed up drilling speeds and extend well depths. Permian Resources indicated that saving about $100,000 per day of drilling time in the second quarter this year.