OPEC+ Increases Production, U.S. Shale Oil Under Pressure

Recently, OPEC+ announced plans to increase oil production, causing international oil prices to fall accordingly. This move has sparked widespread market discussion regarding its motivations and effects, but one thing is clear: the production hike will undoubtedly put pressure on U.S. shale oil producers.

OPEC+'s decision to boost output has driven international oil prices lower, creating differentiated impacts across companies. Although U.S. shale operators have improved in operational efficiency and financial management, most remain at or near break-even levels, with producers outside the prime areas of the Permian Basin facing particularly tough conditions.

Data from Rystad Energy shows that the break-even price for new wells in the Permian Basin is approximately $62 per barrel. However, operating costs drop significantly after production begins, allowing some wells to remain profitable even at prices as low as $38 per barrel. In comparison, the break-even price in the Delaware Basin is close to $56 per barrel, while costs are higher in the Midland Basin and the Eagle Ford region, averaging around $66 per barrel. Current West Texas Intermediate (WTI) crude prices have already fallen below the $60-per-barrel threshold; if prices continue to decline, a significant number of U.S. shale oil companies will face losses, and high-cost producers may be forced to cut or halt production to limit losses.

Adding to the concerns of the U.S. shale industry, current U.S. government policy appears increasingly oriented toward maintaining low oil prices. To curb inflation, controlling energy prices has become a key policy objective. While the Trump administration previously reduced producer costs by lifting drilling bans and approving new pipelines and export terminals, such measures have had limited impact in a low-price environment. For shale companies, maintaining a reasonable oil price level is crucial—yet this directly conflicts with the government's goal of controlling inflation.

Under these circumstances, the U.S. oil and gas sector struggles to receive meaningful policy support. It is this divergence between policy direction and economic reality that may represent the greatest challenge facing the U.S. shale industry in today’s low oil price environment.