The head of the largest independent oil producer in the Permian Basin predicts US shale production has peaked and will likely decline from here as oil prices hover near four-year lows.
“We have a very good view of what the US looks like. And right now that’s a business that’s slowing dramatically and likely declining in terms of production,” Diamondback Energy (FANG) CEO Travis Stice said during the company’s earnings call on Tuesday morning.
Stice, who is slated to step down and become executive chairman later this month, issued a shareholder letter on Monday in which he pointed to declining crew count activity in the Permian Basin as an indicator that “production has peaked” and will begin to decline this quarter.
“We know a lot of people in the business,” Stice told analysts. “Every single conversation I’ve had with … operators is that this oil price doesn’t work.”
Industry insiders have highlighted that the rising cost of drilling is causing production to plateau after reaching an all-time high last year. Weekly rig counts have also been trending lower compared to a year ago, according to Baker Hughes data.
On Tuesday, oil prices rebounded after touching their lowest point in four years in the prior session.
West Texas Intermediate (CL=F) futures rallied over 3% to hover just below $60 per barrel. Brent crude (BZ=F), the international benchmark, also rebounded to trade near $63 per barrel.
In April, prices saw their worst monthly drop since November 2021 over demand fears stemming from a global trade war and a decision by the Organization of Petroleum Exporting Countries and its allies (OPEC+) to increase output.
Given President Trump’s desire for lower energy costs, JPMorgan analysts predict that oil prices would have to drop to $50 before the administration intervenes to support the market. That means a so-called “Trump put” in the form of a tariff pause, which helped plunging bond prices and stocks, doesn’t appear to be in the cards to boost oil.
“While the recent de-escalation in trade talks has reduced the probability of a bear case, the ‘Trump put’ does not extend to energy, as the administration continues to prioritize lower oil prices to manage inflation,” JPMorgan analysts wrote in a note last week.
Ines Ferre is a Senior Business Reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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