More headwinds are expected to face oil prices in September after OPEC+agreed to lift its production ceiling, a move that is likely to soon ripple from Vienna to the Permian Basin.
A new report from Rystad Energy highlighted that by allowing an additional 547,000 B/D to flow into global markets next month, the expanded version of the original OPEC will complete its planned rollback of a 2.2 million B/D cut announced in late 2023.
Rystad concluded that the OPEC+ decision has turned market sentiment bearish despite the looming impact of US tariffs targeting Russian crude exports, particularly to India, which ramped up purchases of discounted Russian oil following the outbreak of the war in Ukraine.
“Whatever metric or dashboard you look at, the market currently lacks clear direction, with uncertainty lingering as the US prepares potential measures against Russia and buyers of Russian oil,” said Mariano Alonso, vice president of commodity markets analysis at Rystad.
US President Donald Trump on 6 August increased a planned blanket tariff on Indian goods imported to the US from 25 to 50% in retaliation for importing Russian crude oil. The new tariffs are set to go into effect in 3 weeks per a White House executive order. The original 25% tariff takes effect 8 August.
Indian Prime Minister Narendra Modi has so far refused to back down. In an official statement issued on 4 August, his government said, “The targeting of India is unjustified and unreasonable,” adding that the EU imports more Russian energy and chemical products than India does. The statement also called out the US for continuing to source Russian materials for its nuclear sector, electric vehicle manufacturing, and chemical industries.
Rystad’s Alonso said markets are witnessing the rise of “a new oil diplomacy” that connects India and China more tightly with Russia in ways that may prove difficult for the US to unwind.
One of the biggest challenges facing the US in this regard is India’s refinery base. Nearly two-thirds of its capacity is designed to process medium-grade crude such as Russia’s Urals blend. Another 30% can refine lighter grades such as those from US shale, with the remaining 10% suited for heavier slates.
Unless a compromise emerges that aligns with India’s refining mix and energy security priorities, Rystad warned the situation is headed for a “standoff.”
Shale Executives Signal Slowdown
The additional barrels expected to hit the market next month from OPEC+ are likely unwelcome news for US producers already signaling a slowdown in activity ahead of the announcement.
The US rig count has declined in 12 of the past 13 weeks, falling to around 410 active oil rigs, a 15% drop from a year ago, according to figures from Baker Hughes. Natural gas rigs, by contrast, have increased 27% year over year, reaching 98 thanks in part to rising demand for gas-powered electricity generation in the US.
Further evidence of a pullback on the liquids supply picture comes from the hydraulic fracturing spread count tracked by Primary Vision.
The number of active spreads as of 1 August has fallen from 243 a year ago to 167. Matt Johnson, CEO of Primary Vision, said on LinkedIn that this 30% drop means US frac activity is now at its lowest level since 2021. “Some of the slowdown is weather-related, but a lot of this descending trend has been driven by economic uncertainty,” he noted.
Wood Mackenzie issued caution in a July report that said the US Lower 48 shale plays may have reached a tipping point after growing from 4 million B/D in 2010 to more than 11.3 million B/D today.
“Growth, though, is coming to an end,” analysts from the energy consultancy said. They project US onshore volumes will plateau and begin declining later this year, with output falling by 500,000 B/D by the end of 2027 due to lower prices and reduced capital spending.
Making Cuts While Holding the Line
Permian independent Diamondback Energy has been among the most vocal US producers in preparing investors for what lies ahead. In a letter posted on 4 August, CEO Kaes Van’t Hof wrote: “We continue to believe that, at current oil prices, US shale oil production has likely peaked and activity levels in the Lower 48 will remain depressed.”
The CEO of Midland-based Diamondback pointed to the second quarter when the number of US rigs targeting oil fell by 59 and noted that the number of active completion crews in the Permian has fallen to about 70, down more than a quarter from 2024 levels.
Diamondback has been part of the pullback, cutting its rig count from 17 to 13 and trimming its 2025 capital spending plan by $100 million while attempting to hold production at or slightly above current levels.
Others have followed suit, scaling back budgets while still trying to sustain output or bump it up by a little. Devon Energy, in its 5 August earnings report, said it is reducing quarterly spending by 7%, from just over $1 billion to $932 million, while modestly raising its full-year production guidance by 2,000 B/D to a range of 384,000 to 390,000 B/D.
Thanks in part to their scale, part of which has been built through sector consolidation, the Permian’s two supermajors suggest that they are better positioned than their smaller rivals.
Chevron reported a new milestone, reaching a 1 million BOE/D average from its Permian operations in the second quarter, with oil production up 14% year over year. Companywide output rose to 3.4 million BOE/D, up about 100,000 from the prior quarter.
But behind the headline numbers, Chevron’s leadership said its focus is now on how to “moderate growth.”
On a 1 August earnings call, investors asked about the outlook for Chevron’s broader shale portfolio, including the DJ Basin in Colorado and newly acquired acreage in North Dakota’s Bakken Shale following itsHess Corp. acquisition.
Mike Wirth, CEO of Chevron, replied that the company aims to hold shale output steady at around 1.6 million BOE/D, rather than grow it. “At some point, growth is less the objective than free cash flow, and we’re approaching that point,” he said.
ExxonMobil reported its highest second-quarter production average since its 1999 merger, with total output reaching 4.6 million BOE/D. The company added 79,000 BOE/D over the previous quarter, driven largely by record Permian production of 1.6 million BOE/D. That figure includes volumes from Pioneer Natural Resources, which ExxonMobil acquired last year.
Speaking with his company’s investors on 1 August, Darren Woods, CEO of ExxonMobil, said that the company is taking a different path than most of its peers.
“While some operators in the Permian are talking about peak production, our current plan is to grow Permian production from about 1.6 million [BOE/D] to 2.3 million [BOE/D] by 2030,” he said. “And with a deep portfolio of technologies we’re developing, we have the industry-unique opportunity to drive capital-efficient, high-return growth well beyond that.”
