Oil prices fall, U.S. shale oil giants cut spending

As OPEC+ announced production increases for the second consecutive month, leading to a plummet in international oil prices, major US shale oil producers are adopting defensive strategies by cutting capital expenditures and reducing drilling activities. Recent reports indicate that industry giants Diamondback Energy and Coterra Energy announced significant cuts in their 2025 capital budget on May 5, along with a reduction in the number of drilling rigs. There is widespread concern in the industry that US onshore shale oil production has peaked and may continue to decline in the future.

Two Major Shale Oil Companies Announce Retrenchment Plans

According to the Financial Times on May 6, Diamondback Energy, one of the main operators in the West Texas Permian Basin, announced a reduction of $400 million in its 2025 capital budget to between $3.8 billion and $4.2 billion and plans to reduce its drilling rigs by three by the end of June, leading to an overall 10% decrease in platform numbers, with further contraction anticipated in the third quarter. The company's CEO, Travis Stice, stated bluntly, "US onshore oil production has likely peaked and will begin to decline this quarter."

Houston-based Coterra Energy simultaneously announced a reduction in its 2025 capital expenditure forecast to $2 billion to $2.3 billion, down from the previous $2.1 billion to $2.4 billion. The company plans to reduce its drilling rigs in the Permian Basin from 10 to 7 in the second half of 2024.

Analysis: US Shale Oil Industry May Enter a Contraction Phase

Andrew Gillick, Managing Director of energy research firm Enverus, warns: "If the current guidance from these two companies remains unchanged throughout the earnings season, US shale oil production will begin a steady decline from the second half of this year through 2026, opening the way for OPEC+ to reclaim market share."

A sharp fall in oil prices is one of the main sources of current pressure. Brent crude prices have fallen below $60 per barrel, reaching a four-year low, and WTI is approaching $57 per barrel. Several OPEC+ representatives have revealed that Saudi Arabia may accelerate the removal of its voluntary 2.2 million barrel per day output cut unless other member countries agree to cut production, undoubtedly increasing global crude supply pressure.

Additionally, the uncertainty brought by the Trump administration's tariff policies further exacerbates market concerns about the outlook for oil demand, creating a multi-pronged negative resonance.

Profitability Under Pressure, Small and Medium Producers May Face Exit

Analysts point out that with current prices below $60 per barrel, many shale oil producers are facing profitability pressures. Producers in older areas with depleted resources or higher costs may have to halt drilling, shut down rigs, or even cut jobs.

In the long run, the US share in the global oil market may be eroded by OPEC+ countries with lower costs. Against the backdrop of dual pressures on supply and demand, policy uncertainties, and dramatic changes in competitive dynamics, the US shale oil industry is entering a new period of challenges.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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