Fears of a global oil glut that had been expected to crater crude prices are fading amid resilient energy demand, according to Permian Basin driller Diamondback Energy Inc.
As recently as mid-December, the prevailing outlook among respected oil watchers was that a huge surfeit was in the making that would send crude prices tumbling. Everyone from the International Energy Agency to prominent trading houses such as Trafigura Group were warning of dark days ahead as supplies overwhelmed demand.
But the specter of too much crude has failed to materialize, Diamondback Chief Executive Officer Kaes Van’t Hof wrote in a letter to shareholders Monday. And although the danger hasn’t passed, it appears to be receding, he added.
“The wave of oversupply that has been widely telegraphed for the better part of the last two years continues to get pushed to the right,” Van’t Hof wrote. “At some point the market will slowly begin to find reasons to be less bearish as demand is strong and the global economy is growing.”
So far, price signals appear to validate Van’t Hof’s analysis: Just eight weeks into the year, benchmark US oil futures already have advanced more than 15%, wiping out almost all of 2025’s 20% loss.
For its part, Diamondback is still taking a cautious approach, pledging to hold output roughly steady with the final three months of last year. But a closer look at Van’t Hof’s letter reveals that the company is exploring deeper layers of the Permian region to locate as-yet untapped oil reserves.
“We have begun to meaningfully test the deepest development zones,” he wrote.
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