U.S. crude production reaches its peak despite prices declining, according to leading shale provider's cautionary statement
Shale Producers Slash Spending, Sparking Concerns Over US Output
In a stark move, two major American shale drillers have announced budget cuts, triggered by sliding oil prices. Diamondback Energy, one of the leading players in West Texas' Permian basin, the country's largest oilfield, predicts a 15% drop in US fracking crews this year, with further declines expected unless prices recover swiftly.
Diamondback is slashing its 2025 capital budget by $400 million, bringing it between $3.8 and $4.2 billion. The company is also dropping three drilling rigs. Diamondback expects the number of drilling rigs operating in the US to drop by 10% by the end of June and decline further in Q3.
Travis Stice, Diamondback's CEO, remarks, "Given these activity cuts, it's likely that US onshore oil production has peaked and will start declining this quarter."
Meanwhile, Coterra Energy, a Houston-based energy firm, is trimming its 2025 capital expenditures to $2-$2.3 billion, down from $2.1-$2.4 billion, and plans to reduce its Permian drilling rigs from 10 to 7 in the second half of 2025.
Oil prices plummeted by over $1 a barrel on Monday, settling at four-year lows. The decrease stemmed from OPEC+'s announcement of a second consecutive monthly output increase over the weekend. Brent crude, the international benchmark, closed at $60.23 per barrel, while West Texas Intermediate settled at $57.13 per barrel.
These reduced prices, coupled with fears of global economic harm from US trade tariffs, have caused the price of Brent crude to plummet by nearly 20% in April - the biggest monthly drop in almost three-and-a-half years.
At these prices, many US shale producers may struggle to turn a profit, particularly in older basins, potentially leading to stopped drilling, idled drilling rigs, and job losses. Analysts predict that the US will lose market share to lower-cost OPEC+ producers under current conditions.
Andrew Gillick, a managing director at energy research group Enverus, comments, "Given recent guidance from two major US operators, shale production is expected to decline for the remainder of 2025 and into 2026 - paving the way for OPEC+ to regain market share."
Despite these worries, US President Donald Trump has welcomed the slumping oil prices, maintaining that they will help reduce inflation. On Monday, Trump suggested that plummeting oil prices could bring an end to the war in Ukraine by forcing Russia - heavily reliant on crude exports - to negotiate.
[1] EIA shale oil production forecasts suggest that US shale has not yet peaked, with projections indicating a peak at around 10 million barrels per day in 2027. [2] Recent data reveal that US oil production continues to fluctuate but has yet to enter a sustained decline.
The slashing of budgets by shale drillers, such as Diamondback Energy, due to dropped oil prices could lead to a decline in US fracking crews and drilling rigs, potentially signaling inflation in the economy as fewer barrels of oil are produced. Meanwhile, the lower oil prices could benefit certain sectors, like sports, as they might reduce travel costs for professional teams.
