Energy Prospectus

"We Are At A Tipping Point": Shale Giant Diamonback Says US Oil Output Has Peaked, Slashes CapEx Amid OPEC Price War
Tyler Durden's Photo
by Tyler Durden
Tuesday, May 06, 2025 - 05:15 AM
The OPEC price war has made landfall in the US.

Following our report earlier that Saudi Arabia has declared a new price war on OPEC+ quota-busters such as Kazakhstan, and non OPEC+ members such as US shale producers, today after the close Diamondback Energy, the largest independent oil producer in the Permian Basin, made a historic pronouncement today when it said that production has likely peaked in America’s prolific shale fields (something we also mentioned earlier in the day) and will decline in the months and years ahead after crude prices plummeted.

Separately, the Texas company trimmed its own full-year production forecast Monday, and said that it expects onshore oil rigs across the entire US industry to drop by almost 10% by the end of the second quarter and fall further in the months after.

“This will have a meaningful impact on our industry and our country,” Diamondback Chief Executive Officer Travis Stice wrote. “We believe we are at a tipping point for U.S. oil production.”

Read more: https://www.zerohedge.com/commodities/we-are-tipping-point-shale-giant-diamonback-says-us-oil-output-has-peaked-slashes-capex

Note from HFI Research:

Everything that's happening today will inevitably lead to an oil bull market. The only thing readers have to worry about now is a matter of timing the near-term cautiousness with the long-term optimism. This fine balance of navigating your emotional and cognitive mood will be critical in determining your ultimate long-term payout.

What do I mean by that?

In the near term, there are a lot of key hurdles we have to navigate through:

OPEC+ is expediting the unwinding of voluntary production cuts.

Non-OPEC supply losses are happening and need to show up in the market.

Real uncertainty over global oil demand amidst the tariff chaos and how it will impact global oil demand.

What will global oil balances do while everything unfolds?

By Q4 this year, most of these hurdles/variables will be answered. At this point, and with a bit of luck, perhaps the energy stock valuations will be so attractive as to make the buy opportunity "obvious".

Here's what I do know with a high degree of certainty:

US shale crude oil production was already rolling over, so the incoming supply drop is a certainty.

Associated gas production will be weak and with the structural demand increases coming, natural gas will be the first to start the multi-year bull market. < My forecast is that HH natural gas prices will top $5.00/MMBtu by the end of November. Our "Gassers" are the Safe Bet now.

OPEC+ production increase over the summer will be subdued relative to supplies today. The impact of the truncated production increase will be minimal and the physical oil market will sniff that out soon (in the form of flat crude exports).

Saudi Aramco increased OSP (official selling price) to Asia today, signaling higher-than-expected demand in key regions like China. Despite higher supplies, this is an interesting signal to watch.

My prediction is that in the coming months, the fundamental datapoint will continue to point in one direction (trending bullish with non-OPEC supplies disappointing), and the perception/narrative will remain bearish.

This increasing disconnect will create a lot of opportunities for patient investors. I think the clarity coming later this year coupled with some of the variant perceptions we have will allow us to take advantage of what's to come.