
U.S. oil production has likely peaked and will start to decline due to price plunge, Diamondback CEO warns
U.S. onshore oil production has likely peaked and will start to decline due to the recent plunge in crude prices, jeopardizing the nation's position as the world's largest fossil fuel producer and its energy security, the CEO of Diamondback Energy told shareholders in a letter this week
U.S. crude oil prices have tumbled about 17% this year as recession fears due to President Donald Trump's tariffs weigh on demand expectations. At the same time, OPEC+ producers led by Saudi Arabia are rapidly increasing supply to the market.
Adjusted for inflation, there have only been two quarters since 2004 when front-month oil prices have been as cheap as they are now, excluding 2020 when the Covid-19 pandemic swept the world, Diamondback CEO Travis Stice wrote.
'Therefore, we believe we are at a tipping point for U.S. oil production at current commodity prices,' Stice warned the company's shareholders in a letter published Monday. 'It is likely that U.S. onshore oil production has peaked and will begin to decline this quarter,' Stice told investors in his letter, pointing to cuts in activity levels.
Diamondback is an independent oil and gas producer focused on the Permian Basin, the most prolific oil patch in the U.S. The company is the third biggest oil producer in the Permian and the sixth biggest in the continental U.S., according to data from Enverus.
U.S. crude oil prices rose more than 4% to $59.56 per barrel Tuesday as domestic production is expected to decline.
Energy security at risk
The shale revolution over the past 15 years has transformed the U.S. into the largest fossil fuel producer in the world, with the country producing more oil and gas than Saudi Arabia and Russia combined, the CEO said.
'This has transformed our economy and given the United States a level of energy security not thought possible at the beginning of this century,' Stice told investors. 'Today's prices, volatility and macroeconomic uncertainty have put this progress in jeopardy,' the CEO warned.
Depending on how much oil prices fall, the amount of capital needed for the U.S. to produce 13 million barrels per day and for the Permian to produce 6 million bpd 'might be an untenable lift for the business model that we put in place, where we're returning so much back to our investors who own the company,' Stice told analysts on Diamondback's earnings call Tuesday morning.
'We don't have a crystal ball in the rest of the world, but we have a very good view of what the U.S looks like, and right now, that's a business that's slowing dramatically and likely declining in terms of production,' Stice said.
Onshore production to decline
The number of crews fracking shale for oil and gas has already fallen 15% this year with crews in the Permian Basin down 20% from a peak in January, Stice estimated, warning that number of crews will likely decline further.
Rigs focused on oil production are expected to decline nearly 10% by the end of the second quarter and fall further in the third, the CEO said.
Diamondback has cut its capital budget by about $400 million to $3.4 billion to $3.8 billion this year. Trump's steel tariffs are the biggest cost headwind the oil producer is currently fighting, Stice said. Those tariffs have increased well costs by about 1% or $40 million annually, the CEO said. Efficiency gains are expected to offset rising costs as activity slows in the coming quarters, he said.
Diamondback has dropped three rigs and one completion crew, and the company expects to remain at these levels through the majority of the third quarter, the CEO said in his letter. It now expects to drill between 385 to 435 wells this year and complete 475 to 550 wells.
'To use a driving analogy, we are taking our foot off the accelerator as we approach a red light,' Stice said. 'If the light turns green before we get to the stoplight, we will hit the gas again, but we are also prepared to brake if needed.'
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


The Guardian
2 hours ago
- The Guardian
UK officials hopeful that US will start lifting car tariffs this week
UK officials are hopeful the US will begin lifting tariffs on British cars as soon as this week after the British trade secretary meets his US counterpart in London. Jonathan Reynolds is due to meet Howard Lutnick, the US commerce secretary, on Tuesday evening to discuss the deal to lower US tariffs on cars, steel and aluminium. Downing Street is hopeful that the implementation of the deal will begin this week, according to two people with knowledge of the discussions. The aim is to secure a proclamation from Donald Trump this week that would kickstart its implementation, a government official with knowledge of the process said. The US commerce department would then be tasked with enforcing the tariff reductions on UK goods. Officials expect tariffs on British cars to be reduced first because the process is less complex than with aluminium and steel, according to the two people briefed on progress in the talks. Trump and Keir Starmer announced a 'historic' trade agreement last month that promised relief for key British industries affected by US import taxes. Trump agreed to reduce his 25% aluminium and steel tariffs to zero and slash his 25% tariff to 10% for up to 100,000 British cars a year. Two weeks ago Trump doubled US tariffs on steel and aluminium to 50% but said the UK would stay at the 25% rate until 9 July, pending enforcement of the deal and assuming that the British government 'complies with relevant aspects'. Ministers and negotiators are now racing to thrash out the details before that deadline. A trade department source stressed that the government could not predict the actions of the US administration. The UK is the only country so far that has struck an agreement with the US, though businesses have yet to feel its benefits. Starmer told MPs last Wednesday that he hoped the agreement with the US could come into effect 'in just a couple of weeks'. Cars are the UK's biggest export to the US, worth about £9bn last year. The value of the UK's steel and aluminium exports is much smaller, at about £700m a year, but the US is an important market for them. Sign up to First Thing Our US morning briefing breaks down the key stories of the day, telling you what's happening and why it matters after newsletter promotion One of the remaining questions for British ministers is how the quota of 100,000 cars will be allocated. Options include a free-for-all system until the quota is met, splitting it into 25,000 car exports a quarter, or earmarking a certain number of exports for small and medium-sized manufacturers. One issue the US government is concerned about is steel from other countries being processed in the UK and then exported to the US at a 0% tariff. This has triggered fears that the deal could end up excluding the UK's biggest steelmaker, Indian-owned Tata Steel, because of the origin of some of its products. Lutnick is in London for trade talks with China that aim to resolve mounting tensions between the world's two largest economies. Washington and Beijing agreed a temporary truce over tariffs last month but each country has since accused the other of breaching the deal.


Reuters
2 hours ago
- Reuters
US still dependent on Canadian oil, despite Trump's claims, Cenovus CEO says
CALGARY, June 10 (Reuters) - The U.S. is still reliant on Canadian oil imports, despite claims made by U.S. President Donald Trump, Cenovus Energy's CEO said on Tuesday at a conference in Calgary, Alberta. Trump has threatened on-again, off-again tariffs on Canada's oil, of which nearly 4 million barrels per day are exported to the United States. Canada also remains dependent on U.S. energy systems, Cenovus CEO Jon McKenzie said, adding the country must diversify its customer base.


BBC News
2 hours ago
- BBC News
World Bank predicts worst decade for global growth since 60s
The global economy will see the slowest decade for global growth since the 1960s as the effect of Donald Trump's tariffs are felt, the World Bank has two thirds of countries in the world had their growth forecasts cut from the bank's last set of predictions six months bank predicts global growth of only 2.3% in 2025, which is 0.4% lower than was forecast in January, and for 2027, it predicts growth of 2.6%Japan, Europe and the US were among those downgraded in the bank's twice yearly report. The bank's last set of forecasts in January were made before Donald Trump took then, his introduction of a universal 10% tariff on all imports into the US, as well as higher tariffs on steel and aluminium, caused financial markets to plunge in early April.A trade ruling found the bulk of his global tariffs to be illegal in May, although the Trump administration won an appeal to keep them in place for World Bank downgraded its growth forecast for the US in both 2025 and 2026, because of escalating trade tensions rattling investor confidence as well as private it not downgrade the US's main rival, China, which the bank said had enough financial stability to weather the "significant headwinds" from global political uncertainty."Against the backdrop of heightened policy uncertainty and increased trade barriers, the global economic context has become more challenging," the report said, adding that more "sentiment-sapping policy uncertainty" would come because of the potential for "further rapid shifts" in trade-restrictive moves by bank said there would be further cuts in growth if the US increased tariffs, and warned of rising could lead to "global trade seizing up in the second half of this year, accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets," the report it stopped short of predicting a global recession, saying the chances of that were less than 10%.The report comes after the OECD also downgraded its outlook for the world economy. It said global growth is now expected to slow to a "modest" 2.9%, down from a previous forecast of 3.1%.In the mean time, a new round of talks aimed at resolving the trade war between the US and China has taken place in central London.