The price of Brent crude ended the week at $63.88 after closing the previous week at $61.29. The price of WTI ended the week at $61.06 after closing the previous week at $58.29. The price of DME Oman crude ended the week at $64.76.
Last week, oil prices got a boost from the U.S. and the U.K. agreeing to a trade deal, with hints of more deals on the way. During this past weekend, representatives from China and the U.S. met in Geneva to discuss trade and tariffs. U.S. officials said on May 11 that substantial progress had been made and that a deal had been made with China to reduce the U.S. trade deficit with China. At the time of this writing, few details are known, but the U.S. Treasury Secretary, Scott Bessent, indicated that a statement would be released on May 12. While all the details may not be established, oil prices will get another boost from this “deal”, given the size of the two economies and the extent of the trade between China and the U.S.
Oil prices will also get some support from geopolitics. The geopolitical environment continues to be wobbly with the conflict between Russia and Ukraine still unresolved, the tensions in the Middle East remaining elevated, and the remaining uncertainty surrounding the conflict between India and Pakistan. Additionally, the EU is threatening Russia with new sanctions unless Russia adheres to an unconditional 30-day ceasefire. It has been reported that the sanctions will affect people, entities, and vessels that are involved in the movement and trading of Russian oil, including sanctions against companies based in Vietnam, Turkey and Serbia.
So, for another week, concerns about supply outstripping demand will be put aside. The concerns, however, remain valid. At the last OPEC+ meeting that took place on May 3, members of OPEC+ agreed to increase supply by 411,000 bbl/d in June after increasing supply by a similar amount in May, which was three times the amount previously indicated. OPEC+ is also indicating that a similar level of supply increase will take place in July, and will continue in August, September and October – unless the chronic over-producers (including Kazakhstan, Iraq and Russia) not only comply with previously agreed quotas but also reduce supply further to account for early oversupply. If OPEC+ moves forward with an accelerated plan, the unwinding of voluntary cuts of 2.2 MMbbl/d will be completed in November of this year, instead of September 2026, which was agreed to last December. Even if the tariff issue goes away, demand will not be sufficient to soak up this level of additional supply. Therefore, for oil prices not to move significantly downward, some supply will have to be removed.
Even before the latest downturn in oil prices, Saudi Aramco’s finances were under pressure, with net income for 1Q decreasing by nearly 5% from the previous year, with realized oil prices, on average, falling from $83 in 1Q 2024 to $76.30 in 1Q 2025. In response to the falloff in net income, Saudi Aramco announced that its quarterly dividend will be cut by $10 billion. In March, Saudi Aramco had indicated that its dividend payout for 2025 would be $85.4 billion. During 2024, Saudi Aramco’s dividends were $124.3 billion. The reduction in payouts is also affecting the fiscal situation of Saudi Arabia, which is projected to run a deficit in 2025. Regardless, the production cuts are more likely to come from US shale producers if OPEC+ moves forward with the indicated supply increases.
Our upstream team has recently completed a breakeven analysis of US shale oil producers operating in the major oil plays – Permian, Eagle Ford, Bakken and Denver-Julesburg (D-J).
The breakeven analysis was done for the following tiers: operating breakeven, debt service breakeven, sustaining capex breakeven, and dividend sustaining breakeven. The analysis highlights the Permian Basin's sustained competitive advantage. With the next-to-lowest operating breakeven of $42.90/bbl. and the lowest full-cycle breakeven of $68.17/bbl. In contrast, higher-cost basins such as the Bakken and D-J present more fragile financial structures. The Bakken’s capex breakeven of $83.88/bbl. and dividend breakeven of $92.74/bbl indicate that most operators are currently unable to sustain drilling and distributions without relying on debt or cash from higher-margin assets. Similarly, the D-J Basin—while lower cost than the Bakken—still struggles with a dividend-sustaining breakeven of $80.58/bbl. These dynamics limit both growth and shareholder return and will likely lead to reduced rig activity, delayed completions, or a shift toward only high-return zones in 2025.
For a complete forecast of crude oil and refined products and other energy-related fundamentals and prices, please refer to our Short-term Outlook.
About the Author: John E. Paisie, president of Stratas Advisors, is responsible for managing the research and consulting business worldwide. Prior to joining Stratas Advisors, Paisie was a partner with PFC Energy, a strategic consultancy based in Washington, D.C., where he led a global practice focused on helping clients (including IOCs, NOC, independent oil companies and governments) to understand the future market environment and competitive landscape, set an appropriate strategic direction and implement strategic initiatives. He worked more than eight years with IBM Consulting (formerly PriceWaterhouseCoopers, PwC Consulting) as an associate partner in the strategic change practice focused on the energy sector while residing in Houston, Singapore, Beijing and London.