Recent media reports suggest that OPEC+ is poised to announce a larger-than-expected boost in oil production at its upcoming meeting. While one immediate aim appears to be aligning quota laggards such as Iraq and Kazakhstan with production targets, a deeper strategic objective has emerged: to undermine the U.S. shale oil industry once again, according to a detailed Reuters investigation.
A decade ago, OPEC launched a bold campaign to curb the rise of U.S. shale by flooding the market with oil, triggering a price collapse that forced many shale drillers out of business. Those who survived have since significantly improved their operational efficiency and reduced costs, steadily reclaiming market share from OPEC producers. Despite these gains, shale drilling remains costlier than conventional oil extraction in key Middle Eastern producers like Saudi Arabia.
Sources within OPEC and the broader energy sector, interviewed by Reuters, indicate that the cartel is contemplating another price war. This move aims to regain market share lost to U.S. shale by approving a third consecutive production increase of approximately 411,000 barrels per day starting in July.
One insider familiar with Saudi Arabia’s strategy explained, “The goal is to inject uncertainty into competitors’ plans by keeping prices below $60 per barrel.” This price level pressures shale operators, who already face cost challenges from tariffs and weakening oil demand forecasts. Furthermore, the U.S. shale sector’s principal competition is concentrated in Europe, where political efforts increasingly target reduced oil consumption.
According to the latest Dallas Fed Energy Survey, U.S. shale producers require prices between $26 and $45 per barrel to cover operating expenses on existing wells. However, to profitably drill new wells, prices need to be considerably higher—ranging from $61 per barrel for West Texas Intermediate to $70 for wells in the Permian Basin’s Delaware subregion.
In light of rising costs driven by material inflation and natural reservoir depletion, shale drillers remain vulnerable without OPEC+ having to dramatically sacrifice its own revenues. Big Oil’s dominance is unlikely to wane; rather, it will continue expanding its influence.
It highlights that OPEC’s global market share has shrunk markedly—from over 50% before the shale revolution to 25% today—while U.S. production has increased from 14% to 20%. However, combined OPEC+ output still accounts for nearly half the world’s supply at around 48%, making it a formidable force in global oil markets despite internal divisions, such as Kazakhstan’s inconsistent compliance with quotas.
Adding to shale’s challenges, it recently reported that wastewater disposal issues in Texas have prompted regulatory restrictions on drilling. Pressure build-up in underground disposal reservoirs has heightened leak risks, compelling the Texas Railroad Commission to impose limits until conditions improve.
These developments cast doubt on previous forecasts that non-OPEC supply growth would outpace OPEC’s. Even the International Energy Agency has revised its outlook, acknowledging the difficulties facing U.S. shale, which has disrupted production expansion plans outside the cartel.
Crucially, OPEC+ recognizes the risks inherent in a full-scale price war. While Middle Eastern producers benefit from low extraction costs, they rely heavily on oil revenues to support national budgets, necessitating higher prices. Should OPEC+ pursue another confrontation with shale producers, it is expected to be a more measured and strategic approach than the outright price war witnessed in 2014.
In summary, OPEC+ appears prepared to assert its influence through increased production and market pressure, leveraging shale’s vulnerabilities while carefully balancing its own economic imperatives amid an uncertain global oil landscape.
