BY RON BOUSSO
LONDON — Oil drillers in the US 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.
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 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 percent of world supplies.
The rising tide of US 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 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.
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 $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 $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 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.
