(Oil Price) – OPEC+ just agreed to boost oil production for another month. Luckily for U.S. shale, they also decided to pause the hikes, which would help the shale industry dodge the bullet of WTI of $50. This is good news for an impressively resilient industry, because its resilience seems to taper out around $50 per barrel.
This weekend, the OPEC+ group said it would add another 137,000 barrels daily to global supply. That was bearish news after an extended streak of monthly hikes. Yet the producer cartel also said it planned to suspend the hikes next year for three months. It is now time for investment bank commodity teams to revise their price assumptions and for shale operators to breathe a sigh of relief—they may have avoided having to see their output shrink by 700,000 barrels daily by the end of 2026.
It is no secret that shale oil in the United States has a higher breakeven price than conventional wells in Saudi Arabia. Yet, not all wells are created equal, and some can make money at less than $60 per barrel while others need $70 per barrel and more to break even. Not only this, but costs in the shale patch have been rising, as reported by the Dallas Fed in its quarterly energy survey. Even so, shale production continues growing, hitting another all-time high of 13.7 million barrels daily in August, according to new data from the Energy Information Administration.
A lot of this is thanks to efficiency improvements, energy market analytics firm Kpler said in a report on oil prices and their effect on the U.S. shale industry. The report noted the adverse effect of tariffs, OPEC+ output hikes, and President Trump’s ambition to keep prices at the pump low. It then went on to point out that despite these, U.S. shale production has continued growing even with a lower rig count, thanks to drilling efficiencies and an ample supply of drilled but uncompleted wells.
However, things are about to change if prices remain where they are or go lower, as some analysts expect. Currently at $61 per barrel, if West Texas Intermediate falls lower, it would start hurting shale, Kpler said, forecasting a 700,000-bpd drop in output by the end of 2026 if the benchmark falls to $50 per barrel and stays there for long enough.
Even at $60 per barrel, the price of U.S. crude is affecting activity. According to Kpler, the drilled but uncompleted well inventory in the Eagle Ford and the Bakken basins has shrunk by between 25% and 30% since the start of the year, to 280 and 310, respectively, as of September. “This downward trend is unsustainable, unless drilling ramps back up – a scenario that is unlikely under the current price environment,” Kpler analyst Johannes Raubal wrote in the report. What’s more, he added, a smaller inventory of DUCs makes shale producers less nimble in their response to international price fluctuations.
This is not the best of news, especially with the predictions of even lower international prices due to what many see as a sizable supply overhang. Indeed, Goldman Sachs said back in August it expected oil prices to dip below $60 per barrel next year on the back of that overhang, coming mainly from non-OPEC producers, led by the United States. Non-OPEC supply is actually the chief reason for the glut predictions across analytical outlets, including the International Energy Agency. Yet Kpler expects supply growth among non-OPEC oil producers to peak next year, relieving some of the price pressure. If it peaks before WTI falls to $50—if it ever does, that is—a production squeeze would be avoided. Yet if that growth everyone points to when predicting a glut takes longer to peak, WTI may indeed fall below sustainable production growth levels, even for Big Oil, which often enjoys much lower breakeven prices than independents.
“Although majors and large independents can operate below $50/bbl, this price level would enforce cautious activity for most,” Rauball wrote. This may be bad news for producers forced to curb their production, but it would be positive for future price developments: the moment the news breaks that U.S. oil production is falling, prices will rebound—unless the glut predictions persist, that is. Because these glut predictions move prices, and they can prompt a drop to $50 per barrel even if the fundamentals do not support it.
“A severe, sustained $50/bbl scenario—a view held by some agencies and banks like Goldman Sachs—would cripple US crude supply,” Kpler’s Rauball wrote. The reason some agencies and banks expect such a scenario is the magic combination of high non-OPEC production growth, OPEC unwinding the output cuts, and the notorious glut, which the IEA sees at some 4 million barrels daily in 2026. The fourth ingredient in the doom brew is the perception of slow Chinese demand, because the rate of demand growth in the world’s largest importer of crude has slowed after decades of galloping growth. OPEC+ may have just done U.S. shale a favor by suspending the output hikes.
By Irina Slav for Oilprice.com
