Latest news with #shale
Free Malaysia Today
3 days ago
- Business
- Free Malaysia Today
Opec must squeeze US shale much more to win oil price war
Benchmark US oil prices have dropped by nearly a quarter since January to US$61 a barrel, in response to Opec+'s strategy and concerns over trade wars. (File pic) LONDON : Oil drillers in the US shale heartland are slowing down operations, a sign that the Organization of the Petroleum Exporting Countries' (Opec) high-stakes price war is starting to pay off, but Saudi Arabia will need to exert a lot more pain to make a lasting impact on market share. US oil producers upended the global market in the early 2010s, as the innovative 'fracking' drilling technique allowed them to tap vast onshore shale formations. Consequently, the US, long the world's top oil consumer, became its leading producer as of 2018. It currently pumps around 13.5 million barrels per day (bpd), around 13% of world supplies. The rising tide of US oil has long irked the Opec, which has seen its market share steadily erode over the past two decades. Saudi Arabia, Opec's de-facto leader, in 2014 sought to curb surging US output by flooding the market with cheap oil. This effort bankrupted a number of shale producers, but it only temporarily paused the country's ascent as companies adapted to lower prices and the industry consolidated. Price war redux Riyadh and its allies, a group known as Opec+, are now giving it another go. They surprised the market earlier this year by announcing that they would rapidly unwind 2.2 million bpd of production cuts introduced in 2024. The group is expected to announce further increases in production later this week. Benchmark US oil prices have dropped by nearly a quarter since January to around US$61 a barrel in response to Opec+'s strategy as well as concerns over US President Donald Trump's trade wars. At these prices, many shale wells are not profitable, as frackers require an oil price of between US$61 and US$70 a barrel to expand production, according to a survey conducted by the Dallas Federal Reserve Bank. Sure enough, nimble frackers have already responded by paring back drilling activities to conserve cash. The number of US onshore oil drilling rigs dropped by eight to 465 last week, the lowest since November 2021, according to energy services firm Baker Hughes. Crucially, drillers in the Permian Basin in West Texas and eastern New Mexico, which accounts for nearly half of US production, cut three rigs, bringing the total down to 279, also the lowest since November 2021. Crude production from new Permian wells, a measure of productivity, slightly improved in April, but that was largely offset by declines in other basins. Multiple indicators suggest activity is set to decelerate further. Importantly, Frac Spread Count, which measures the number of crews actively performing hydraulic fracturing, has seen a 28% annual drop to 186, according to energy consultancy Primary Vision, an indication that production could fall sharply in the coming months. Another measure to watch is drilled but uncompleted wells (DUCs), or partially completed wells that can start production quickly, offering operators flexibility to withhold production until market conditions improve. DUCs have risen by 11% since December 2024 to 975 in the Permian Basin. Down but not out While the latest data on shale drilling activity suggests US production will continue to slow, it is far from falling off a cliff. The US energy information administration reduced in May its forecasts for US production in 2025 and 2026 by around 100,000 bpd to 13.4 million bpd and 13.5 million bpd, respectively, compared with 13.2 million bpd last year. Production in the Permian Basin is forecast to average 6.51 million bpd in 2025, down from its previous estimate of 6.58 million bpd. However, that would still mark a significant increase from 6.3 million bpd in 2024. Opec+ may find it even harder to have a sustainable impact now than it did in 2014 as the US shale landscape is significantly different from a decade ago. True, 15 years of intensive oil and gas drilling have depleted a large chunk of the most profitable shale acreage. However, shale drillers have in recent years adopted much stricter spending discipline, focusing on returning value to shareholders in contrast with last decade's focus on growing production. Independent US oil and gas producers have so far reduced their planned 2025 spending commitments by an aggregate 4% to US$60 billion, while output is expected to remain largely flat, according to consultancy RBN Energy. Also, production today is concentrated in the hands of far fewer companies, such as Exxon Mobil and Chevron. These energy majors have developed highly efficient drilling techniques and boast strong balance sheets that leave them better equipped to withstand the Opec assault. Current oil prices are therefore likely to temporarily curb US production but not lead to the type of sharp deceleration seen in 2014. Opec+ will therefore need to deepen and extend its price war for many months if it seeks to fundamentally change the oil production balance of power.
Zawya
3 days ago
- Business
- Zawya
OPEC must squeeze US shale much more to win oil price war: Bousso
LONDON - Oil drillers in the U.S. shale heartland are slowing down operations, a sign that OPEC's high-stakes price war is starting to pay off, but Saudi Arabia will need to exert a lot more pain to make a lasting impact on market share. U.S. oil producers upended the global market in the early 2010s, as the innovative 'fracking' drilling technique allowed them to tap vast onshore shale formations. Consequently, the United States, long the world's top oil consumer, became its leading producer as of 2018. It currently pumps around 13.5 million barrels per day, around 13% of world supplies. The rising tide of U.S. oil has long irked the Organization of the Petroleum Exporting Countries, which has seen its market share steadily erode over the past two decades. Saudi Arabia, OPEC's de-facto leader, in 2014 sought to curb surging U.S. output by flooding the market with cheap oil. This effort bankrupted a number of shale producers, but it only temporarily paused the country's ascent as companies adapted to lower prices and the industry consolidated. PRICE WAR REDUX Riyadh and its allies, a group known as OPEC+, are now giving it another go. They surprised the market earlier this year by announcing that they would rapidly unwind 2.2 million bpd of production cuts introduced in 2024. The group is expected to announce further increases in production later this week. Benchmark U.S. oil prices have dropped by nearly a quarter since January to around $61 a barrel in response to OPEC+'s strategy as well as concerns over U.S. President Donald Trump's trade wars. At these prices, many shale wells are not profitable, as frackers require an oil price of between $61 and $70 a barrel to expand production, according to a survey conducted by the Dallas Federal Reserve Bank. And sure enough, nimble frackers have already responded by paring back drilling activities to conserve cash. The number of U.S. onshore oil drilling rigs dropped by eight to 465 last week, the lowest since November 2021, according to energy services firm Baker Hughes. Crucially, drillers in the Permian Basin in West Texas and eastern New Mexico, which accounts for nearly half of U.S. production, cut three rigs, bringing the total down to 279, also the lowest since November 2021. Crude production from new Permian wells, a measure of productivity, slightly improved in April, but that was largely offset by declines in other basins. And multiple indicators suggest activity is set to decelerate further. Importantly, Frac Spread Count, which measures the number of crews actively performing hydraulic fracturing, has seen a 28% annual drop to 186, according to energy consultancy Primary Vision, an indication that production could fall sharply in the coming months. Another measure to watch is drilled but uncompleted wells (DUCs), or partially completed wells that can start production quickly, offering operators flexibility to withhold production until market conditions improve. DUCs have risen by 11% since December 2024 to 975 in the Permian Basin. DOWN BUT NOT OUT While the latest data on shale drilling activity suggests U.S. production will continue to slow, it is far from falling off a cliff. The U.S. Energy Information Administration reduced in May its forecasts for U.S. production in 2025 and 2026 by around 100,000 bpd to 13.4 million bpd and 13.5 million bpd, respectively, compared with 13.2 million bpd last year. Production in the Permian Basin is forecast to average 6.51 million bpd in 2025, down from its previous estimate of 6.58 million bpd. But that would still mark a significant increase from 6.3 million bpd in 2024. OPEC+ may find it even harder to have a sustainable impact now than it did in 2014 as the U.S. shale landscape is significantly different from a decade ago. True, 15 years of intensive oil and gas drilling have depleted a large chunk of the most profitable shale acreage. However, shale drillers have in recent years adopted much stricter spending discipline, focusing on returning value to shareholders in contrast with last decade's focus on growing production. Independent U.S. oil and gas producers have so far reduced their planned 2025 spending commitments by an aggregate 4% to $60 billion, while output is expected to remain largely flat, according to consultancy RBN Energy. Also, production today is concentrated in the hands of far fewer companies, such as Exxon Mobil and Chevron. These energy majors have developed highly efficient drilling techniques and boast strong balance sheets that leave them better equipped to withstand the OPEC assault. Current oil prices are therefore likely to temporarily curb U.S. production but not lead to the type of sharp deceleration seen in 2014. OPEC+ will therefore need to deepen and extend its price war for many months if it seeks to fundamentally change the oil production balance of power. Want to receive my column in your inbox every Thursday, along with additional energy insights and trending stories? Sign up for my Power Up newsletter here.
Reuters
3 days ago
- Business
- Reuters
OPEC must squeeze US shale much more to win oil price war: Bousso
LONDON, May 29 - Oil drillers in the U.S. shale heartland are slowing down operations, a sign that OPEC's high-stakes price war is starting to pay off, but Saudi Arabia will need to exert a lot more pain to make a lasting impact on market share. U.S. oil producers upended the global market in the early 2010s, as the innovative 'fracking' drilling technique allowed them to tap vast onshore shale formations. Consequently, the United States, long the world's top oil consumer, became its leading producer as of 2018. It currently pumps around 13.5 million barrels per day, around 13% of world supplies. The rising tide of U.S. oil has long irked the Organization of the Petroleum Exporting Countries, which has seen its market share steadily erode over the past two decades. Saudi Arabia, OPEC's de-facto leader, in 2014 sought to curb surging U.S. output by flooding the market with cheap oil. This effort bankrupted a number of shale producers, but it only temporarily paused the country's ascent as companies adapted to lower prices and the industry consolidated. Riyadh and its allies, a group known as OPEC+, are now giving it another go. They surprised the market earlier this year by announcing that they would rapidly unwind 2.2 million bpd of production cuts introduced in 2024. The group is expected to announce further increases in production later this week. Benchmark U.S. oil prices have dropped by nearly a quarter since January to around $61 a barrel in response to OPEC+'s strategy as well as concerns over U.S. President Donald Trump's trade wars. At these prices, many shale wells are not profitable, as frackers require an oil price of between $61 and $70 a barrel to expand production, according to a survey conducted by the Dallas Federal Reserve Bank. And sure enough, nimble frackers have already responded by paring back drilling activities to conserve cash. The number of U.S. onshore oil drilling rigs dropped by eight to 465 last week, the lowest since November 2021, according to energy services firm Baker Hughes. Crucially, drillers in the Permian Basin in West Texas and eastern New Mexico, which accounts for nearly half of U.S. production, cut three rigs, bringing the total down to 279, also the lowest since November 2021. Crude production from new Permian wells, a measure of productivity, slightly improved in April, but that was largely offset by declines in other basins. And multiple indicators suggest activity is set to decelerate further. Importantly, Frac Spread Count, which measures the number of crews actively performing hydraulic fracturing, has seen a 28% annual drop to 186, according to energy consultancy Primary Vision, an indication that production could fall sharply in the coming months. Another measure to watch is drilled but uncompleted wells (DUCs), or partially completed wells that can start production quickly, offering operators flexibility to withhold production until market conditions improve. DUCs have risen by 11% since December 2024 to 975 in the Permian Basin. While the latest data on shale drilling activity suggests U.S. production will continue to slow, it is far from falling off a cliff. The U.S. Energy Information Administration reduced in May its forecasts for U.S. production in 2025 and 2026 by around 100,000 bpd to 13.4 million bpd and 13.5 million bpd, respectively, compared with 13.2 million bpd last year. Production in the Permian Basin is forecast to average 6.51 million bpd in 2025, down from its previous estimate of 6.58 million bpd. But that would still mark a significant increase from 6.3 million bpd in 2024. OPEC+ may find it even harder to have a sustainable impact now than it did in 2014 as the U.S. shale landscape is significantly different from a decade ago. True, 15 years of intensive oil and gas drilling have depleted a large chunk of the most profitable shale acreage. However, shale drillers have in recent years adopted much stricter spending discipline, focusing on returning value to shareholders in contrast with last decade's focus on growing production. Independent U.S. oil and gas producers have so far reduced their planned 2025 spending commitments by an aggregate 4% to $60 billion, while output is expected to remain largely flat, according to consultancy RBN Energy. Also, production today is concentrated in the hands of far fewer companies, such as Exxon Mobil and Chevron. These energy majors have developed highly efficient drilling techniques and boast strong balance sheets that leave them better equipped to withstand the OPEC assault. Current oil prices are therefore likely to temporarily curb U.S. production but not lead to the type of sharp deceleration seen in 2014. OPEC+ will therefore need to deepen and extend its price war for many months if it seeks to fundamentally change the oil production balance of power. Want to receive my column in your inbox every Thursday, along with additional energy insights and trending stories? Sign up for my Power Up newsletter here.
Daily Mail
4 days ago
- Business
- Daily Mail
America's energy revolution goes from boom to bust after Trump's tariffs and sneaky move by Saudi Arabia
Oil bosses have warned that America's energy boom is over, as Trump's tariffs raise production costs and crude prices fall thanks to an increase in production from Saudi Arabia. The shale revolution of the last few years delivered huge volumes of cheap oil and gas that powered the US economy and broke dependence on foreign imports from places such as Iran, Russia and Venezuela. Production hit record highs under President Joe Biden, but is now falling under Trump. The situation presents a direct contradiction to the President's pledges to 'drill baby drill' and assert America's 'energy dominance.' Trump's aggressive trade policies have pushed up the prices of vital materials needed for oil production such as steel, aluminum and casing. At the same time, oil prices are tumbling because the OPEC cartel has decided to flood the market by increasing production. OPEC is a group of oil-producing companies, including Saudi Arabia, the UAE and Iraq, that work together to influence the global oil market and maximize profit. Riyad's shock decision to pump more oil in recent months will threaten America's share of the global oil market, Scott Sheffield, the former head of shale driller Pioneer Natural Resources, told the Financial Times. 'Saudi is trying to regain market share and they'll probably get it over the next five years,' Sheffield explained. US shale producers need oil prices of around $65 a barrel to break even, according to the the Federal Reserve Bank of Dallas. But prices are currently $61.53 a barrel, down 23 percent from this year's high point. US shale producers, such as ExxonMobil and Chevron, are slashing capital expenditure by about $1.8 billion for this year, abandoning rigs, and slashing jobs. Chevron and BP have between them announced 15,000 job cuts across the globe. Bosses have warned the worst is still to come. 'In this environment, we drop the rigs and buy back stock,' Travis Stice, chair and CEO at Diamondback Energy, told the Financial Times. The west Texas-based producer warned earlier this month that US production has now peaked as oil prices continue to slide. 'Every single conversation I've had is that this oil price won't work,' Stice warned. Oil bosses Travis Stice (left) and Clay Gaspar (right) warned that US production is in trouble Other bosses have also laid out the reality of higher costs and lower profits. 'We're on high alert at this point,' Clay Gaspar, CEO at Devon Energy in Oklahoma City, told investors earlier this month. 'Everything is on the table as we move into a more distressed environment.' US oil output is expected to fall 1.1 percent in the next year, according to S&P Global Commodity Insights. This would mark the first annual decline in a decade, excluding 2020 when the pandemic collapsed demand and prices. This triggered a wave of bankruptcies across Texas and North Dakota.
Bloomberg
4 days ago
- Business
- Bloomberg
Devon Energy to Close Houston Office After $5 Billion Grayson Mill Deal
Devon Energy Corp. said it plans to close the Houston office of Grayson Mill Energy after its $5 billion acquisition of the Bakken shale business last year. The shale producer will close the Houston office by September — roughly a year after the deal closed — and move workers to its Oklahoma City headquarters, Michelle Hindmarch, a company spokesperson, said Wednesday in an email statement. She didn't disclose the number of workers affected or cost savings from the move.
