U.S. Shale Drillers Slash Rigs & Spending as OPEC Drowns Market in Cheap Oil
OPEC’s oil tsunami forces American shale to retreat—rigs drop, budgets shrink. Who blinks first?
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The Shale Shakeout
U.S. drillers are folding under OPEC’s price war. Rig counts plummet as budgets get gutted—no one’s crying for these Wall Street darlings, though.
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Flooded Out
Saudi Arabia and friends keep taps wide open, turning black gold into a bargain-bin commodity. Shale’s high-cost ops? First casualties.
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Finance’s Dark Comedy
Remember when shale was ‘energy independence’? Now it’s just another hedge fund hotel gone bankrupt. Pass the popcorn.
Drillers freeze spending as crude drops below survival levels
The EIA’s new projections show a painful drop in American oil production, falling to 13.1 million barrels per day by December 2026. That comes as crude prices collapse to $47.77 a barrel, almost $20 below the break-even point for most U.S. shale companies.
Kirk Edwards, CEO of Latigo Petroleum, based in Odessa, Texas, said his company’s plan is simple: sit tight. “We’ve gone from drill, baby, drill to wait, baby, wait,” Kirk said. He added that no new rigs will go out unless prices stabilize closer to $75.
This comes at a time when TRUMP is publicly calling for more pumping to strengthen U.S. energy dominance. But those calls don’t match the numbers. Right now, only 539 rigs are drilling onshore in the U.S., 10% fewer than the same period last year, based on Baker Hughes data.
Saudi barrels flood the market as prices sink fast
Saudi Arabia, which can pull oil out of the ground for as little as $4 to $5 per barrel, has been increasing output since April. Francisco Blanch, who leads commodity research at Bank of America, said the goal is obvious.
“They’re trying to win back what they lost to U.S. shale,” Francisco said. He expects a long, painful price fight where Saudi and OPEC keep the pressure high for years.
The extra supply is massive. OPEC plans to add more than 2 million barrels a day, equal to the daily demand of Germany. They already agreed this month to raise supply again in September. Meanwhile, demand hasn’t kept up. The International Energy Agency said weak global growth and higher OPEC output could leave the market with a massive glut.
In Texas, the heart of U.S. oil country, anxiety is rising. What used to be fear about war in the Middle East choking global supply has flipped into dread about oversupply.
That’s because West Texas Intermediate has dropped to $62.21 per barrel, well under the $65 minimum that producers in the Dallas Fed’s latest survey say they need to turn a profit.
The financial pressure is real. TD Cowen, an investment bank, said shale drillers will cut 2025 capex by 4% compared to last year. And those top 20 shale producers (excluding ExxonMobil and Chevron) have already slashed $1.8 billion this year alone, based on Enverus data.
To stay alive, companies are drilling smarter. Permian Resources said speeding up drilling has helped cut costs fast, as every day shaved off the job saves around $100,000. But that’s a short-term fix. Kaes Van’t Hof, CEO of Diamondback Energy, admitted they’re “pushing the limits” of what their teams can do.
Markets this week have gone flat. ICE Brent crude is stuck at $66. Trading activity is dead. Everyone’s watching the upcoming Trump-Putin meeting in Alaska, waiting to see if any kind of deal affects supply. Until then, the market is frozen.
Gas prices aren’t immune either. LNG is already down $0.50 per MMBtu this week. Traders expect some kind of breakthrough, but there’s nothing yet. For now, the oil market is just holding its breath.
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