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US drillers are letting production rise again — just not the way they used to.
By David Wethe and Kevin Crowley
Gone are the go-go days of the US shale patch, when producers came out guns blazing, eager to boost output through fracking.
Drillers are now so efficient they can expand production marginally without really trying. And that’s exactly what they’re expected to do this year.
Producers are simply letting spending budgets drift to the higher end of guidance ranges — and that’s enough to spark a little growth. Industry consultant S&P Global Inc. forecasts US oil output will expand by roughly 250,000 barrels in 2026.
If that holds, it would be the smallest expansion since the US oil industry rebounded from the pandemic.
“What we’re really going to see is just production creep,” said Reed Olmstead, executive director of upstream research at S&P Global. “It’s just going to be everybody trending towards the high end of their guidance, and that’ll create that extra couple hundred thousand.”
The Trump administration has repeatedly called on US companies to increase crude output, often to no avail because management teams were loath to sink capital into new wells when oil prices weren’t high enough to meet profit thresholds.
In fact, the shale patch entered this year with analyst expectations for output to actually drop for the first time since the pandemic.
But now that oil prices have remained sufficiently above the range of $62 to $70 per barrel that economists say producers need to turn a profit, companies are willing to let output edge higher.
Diamondback Energy Inc. is a key example. The biggest pure-play producer in the Permian Basin of West Texas and New Mexico told investors on May 5 it was reacting to price signals brought on by the Middle East conflict by allowing more production to come online and raising spending to the top end of the guidance range.
Other companies’ spending budgets will undoubtedly be watched closely in the coming weeks as shale earnings are released. But unlike the industry’s boom years, investors aren’t looking for producers to throw caution to the wind. A little extra output is increasingly all the shale patch has to offer.
—David Wethe and Kevin Crowley, Bloomberg News
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