U.S. oil and gas producers are already cutting back spending and activity in anticipation of a bumpy ride ahead. A new forecast from S&P Global Commodity Insights details just how bumpy that ride will get.
As OPEC+ accelerates its unwinding of production cuts — along with supply growth elsewhere — the company forecasts production of oil and condensate will grow 2.2 million barrels a day in the second half of the year. That compares to expected crude demand growth of just 390,000 barrels per day.
“The markets have held up so far, (so) this is not something that’s necessarily imminent,” Jim Burkhard, vice president and global head of crude oil research told the Reporter-Telegram.
Burkhard pointed out that June, July and August traditionally see the highest oil demand globally as people travel and try to cool their homes.
“The real key to our outlook, as it stands now, if OPEC+ fully unwinds those cuts and if they keep at that level, in the fourth quarter when demand is lower, there will be a lot of supply,” he said.
Demand growth is forecast to average 770,000 barrels per day. As a result, S&P has lowered its price outlook. Dated Brent is expected to range from $50 to the mid-$60s, while WTI could range between the upper $40s and low $60s.
The U.S. is expected to bear the brunt of the impacts of an oversupplied market because of the nature of U.S. shale, which is more responsive to price signals than other sources of non-OPEC supply. And the Permian Basin, as the heart of U.S. shale and probably the most important producing region in the world, will also feel those impacts.
“Shale is not dead, but it appears, based on supply and demand, to be in for a rough patch,” he said.
Oil prices have recovered from their April and May lows but remain below what they had been. But that could set the stage for a price recovery in a couple of years, Burkhard said.
“The U.S. is the single source of supply growth. If that engine goes into reverse and declines, you’ve lost your biggest single source of supply. That could rebalance the market in 2027-28,” he said.
As prices have fallen, producers have moved to protect returns by cutting spending. Burkhard said the result is a deceleration in growth to end the year, with the greatest impact coming in 2026. By the end of next year, U.S. oil production could be down 640,000 barrels per day from mid-2025.
“Investors want to make money, not lose money,” Burkhard said. “I do think capital discipline will play a greater role in this down cycle.”
