The US oil industry has laid off thousands of workers and cut billions in spending due to lower oil prices and the biggest consolidation in a generation in what could mark the end of the rapid output growth that made the US the world’s top producer.<\/p>\n\n\n\n
The Organization of the Petroleum Exporting Countries and its allies in the OPEC+ producer group are increasing output to win back market share that was lost to the United States and other producers in recent years. OPEC+ agreed on Sunday to further raise production from October by 137,000 barrels per day.<\/p>\n\n\n\n
Those increases have driven international oil prices down around 12% this year to just above breakeven levels for many US oil companies, prompting cuts in spending and jobs that industry officials say could curb production.<\/p>\n\n\n\n
A plateau or fall in output would diminish the United States’ sway in global markets and challenge US President Donald Trump’s energy dominance agenda for the country.<\/p>\n\n\n\n
Conoco Phillips \u2013 the third largest US oil producer \u2013 said last week it would cut up to 25% of its staff. That followed a similar announcement in February by rival Chevron, which said it would lay off 20% of its workforce, totaling roughly 8,000 people, according to Reuters.<\/p>\n\n\n\n
Oilfield service company SLB said it was reducing its workforce earlier this year, while Halliburton has cut staff in recent weeks.<\/p>\n\n\n\n
Lower oil prices and rising costs have pushed 22 public US producers, including Occidental Petroleum Corp, Conoco Phillips, Diamondback Energy, to cut their capital expenditures by $2 billion, according to a Reuters analysis of second quarter earnings announcements. The analysis did not include oil majors Exxon or Chevron.<\/p>\n\n\n\n
US oil rig count \u2013 an indicator of future activity \u2013 has fallen by about 69 to 414 this year, according to Baker Hughes.<\/p>\n\n\n\n
\u201cWe’ve gone from \u2018drill, baby, drill’ to ‘wait, baby wait\u2019 here in the Permian,\u201d said Kirk Edwards, president of Texas-based Latigo Petroleum, referring to the largest US oilfield.<\/p>\n\n\n\n
The market needs oil prices to consistently trade around $70 to $75 a barrel for rigs to get back to work again, he said.<\/p>\n\n\n\n
Many analysts are already forecasting a drop in production from the record 13.2 million barrels per day reached in 2024, powered by the country’s shale revolution.<\/p>\n\n\n\n
Research firm Energy Aspects expects US onshore output to drop by 300,000 bpd in 2025 from last year, while rival Wood Mackenzie estimates US onshore growth from lower 48 US states of 200,000 bpd, the smallest increase since 2021 when COVID-19 ravaged demand.<\/p>\n\n\n\n
Trumps trade policies and tariffs have also pushed up costs of materials used in the industry such as steel and casings.<\/p>\n\n\n\n
In a video message to employees announcing the layoffs, ConocoPhillips said controllable costs have risen by about $2 per barrel to $13 in 2024 from three years prior, making it harder for the company to compete.<\/p>\n\n\n\n
\u201cThere is a sense of inflation coming up, tariffs are having an impact, so therefore the global economy is going to be slowing, and demand is going to go down,\u201d ConocoPhillips CEO Ryan Lance said during a town hall meeting on Thursday.<\/p>\n\n\n\n
While US operators are dropping rigs, the US frac spread count \u2013 which measures equipment deployed to fracture subsurface rock and complete wells – has fallen by 39 so far this year to 162 as of last week, its lowest since February 2021, according to market consultancy Primary Vision.<\/p>\n\n\n\n
Diamondback, another large driller in the Permian basin, said it expects the cost of steel casing for wells to increase almost 25% through the course of 2025 as Trump’s steel tariffs bite, raising the breakeven cost of nearly every well drilled in the United States this year.<\/p>\n\n\n\n
\u201cYou can’t take 60 rigs and 20 to 30 frac spreads out of the Permian in three months and not eventually see a production response,\u201d Diamondback Energy CEO Kaes Van’t Hof said in an earnings call in August.<\/p>\n\n\n\n
\u201cWith volatility and uncertainty persisting, we see no compelling reason to increase activity this year,\u201d he added.<\/p>\n\n\n\n
The company said operating costs had risen to 35% of total spending compared with about 20% historically.<\/p>\n","protected":false},"excerpt":{"rendered":"
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