Some small U.S. shale producers are putting the brakes on oil drilling as crude prices sink to multi-year lows and steep tariffs drive construction costs higher.
Less drilling could slow future output growth from the world's top oil producer. Total U.S. production is forecast to reach a new record this year at 13.7 million barrels per day (bpd), with some 9.7 million bpd coming from shale.
Both U.S. and international energy watchdogs have, however, cut their forecasts for 2025 total U.S. production growth.
The U.S. Energy Information Administration (EIA) cut its output growth forecast by 100,000 bpd to 300,000 bpd.
Pointing to President Donald Trump's trade tariffs, the Paris-based International Energy Agency (IEA) cut its U.S. supply growth forecast for 2025 by 150,000 bpd to 490,000 bpd, and also predicted global oil demand growth would fall to its slowest rate in five years.
"We're paring back on drilling until we see what happens with the tariffs and demand for oil, and where oil prices go," said Bill Daugherty, co-founder and managing partner of Blackridge Resources, an independent operator working in the Appalachian basin in the eastern U.S., producing around 500 bpd.
Blackridge will drill only 10 of the 15 prospects it had planned at the start of the year because of the recent slump in oil prices, Daugherty said.
U.S. crude futures tumbled to a more than four-year low of $55.12 a barrel on April 9 as investors worried that tariffs could prompt an economic slowdown. The benchmark rebounded to over $62 that day after Trump announced a 90-day pause on tariffs for countries other than China, but remains pressured by the escalating trade war. On Thursday, U.S. crude settled at $62.79.
"There are people in the administration touting that oil should be in the $50s. Even the best acreage in the Permian isn't going to make much money in the $50s," said Dan Doyle, president and owner of Arena Resources, a Wyoming-based operator producing around 1,000 bpd, and fracking firm Reliance Well Services. The Permian is the largest U.S. oilfield.
Doyle is looking to delay plans to drill three wells next month at a drilling pad built in Powder River, Wyoming, potentially risking a large penalty.
"Nobody's going to make money at $60 oil," he said.
Oil producers are set to report their first quarter earnings in the coming days.
U.S. oilfield service firms Baker Hughes(BKR.O) and Halliburton (HAL.N) already warned in earnings this week of the hit to their revenues from less drilling. Baker Hughes also flagged cost impacts from tariffs.
Morningstar analysts estimate that for every $5 decline in crude prices, U.S. shale spending falls by about 5%.
'A REAL SLOW DOWN'
This additional cost can add up to $64,000 per well, a near 10% increase to the $650,000-700,000 it costs to drill and complete a well, Daugherty added.
Doyle's Pennsylvania-based fracking company Reliance Well Services, which has 150-200 trucks, has received six jobs from January to May, compared with 40 over the same period of 2024, and 62 in 2023 - due to tumbling oil prices.
"We're looking at a real slow down right now in fracking because people are going to wait," Doyle said.
The U.S. oil and gas rig count had already declined by about 5% in 2024 and 20% in 2023 as lower energy prices prompted drillers to focus more on boosting shareholder returns and paying down debt rather than increasing output.
Some operators not currently drilling are taking the slump as an opportunity to get ahead of prices rebounding.
"It's a good time to be moving ahead, buying acreage and getting ready for the next cycle," said Michael Oestmann, CEO of Midland-based Permian producer, Tall City IV Exploration, which is planning to drill in late 2025 and early next year.
