Diamondback CEO says US shale production has peaked

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The pinnacle of the most important unbiased oil producer within the Permian Basin predicts US shale manufacturing has peaked and can doubtless decline from right here as oil costs hover close to four-year lows.

“We have now an excellent view of what the US seems to be like. And proper now that is a enterprise that is slowing dramatically and sure declining when it comes to manufacturing,” Diamondback Vitality (FANG) CEO Travis Stice mentioned throughout the firm’s earnings name on Tuesday morning.

Stice, who’s slated to step down and turn into govt chairman later this month, issued a shareholder letter on Monday wherein he pointed to declining crew count activity in the Permian Basin as an indicator that “manufacturing has peaked” and can start to say no this quarter.

“We all know lots of people within the enterprise,” Stice advised analysts. “Each single dialog I’ve had with … operators is that this oil worth would not work.”

Trade insiders have highlighted that the rising price of drilling is inflicting manufacturing to plateau after reaching an all-time high final 12 months. Weekly rig counts have additionally been trending decrease in comparison with a 12 months in the past, in line with Baker Hughes knowledge.

On Tuesday, oil costs rebounded after touching their lowest level in 4 years within the prior session.

West Texas Intermediate (CL=F) futures rallied over 3% to hover just under $60 per barrel. Brent crude (BZ=F), the worldwide benchmark, additionally rebounded to commerce close to $63 per barrel.

In April, costs noticed their worst month-to-month drop since November 2021 over demand fears stemming from a world commerce conflict and a call by the Group of Petroleum Exporting Nations and its allies (OPEC+) to extend output.

Given President Trump’s need for decrease power prices, JPMorgan analysts predict that oil costs must drop to $50 earlier than the administration intervenes to assist the market. Meaning a so-called “Trump put” within the type of a tariff pause, which helped plunging bond prices and stocks, would not look like within the playing cards to spice up oil.

“Whereas the current de-escalation in commerce talks has lowered the chance of a bear case, the ‘Trump put’ doesn’t lengthen to power, because the administration continues to prioritize decrease oil costs to handle inflation,” JPMorgan analysts wrote in a word final week.