Is the U.S. Oil Industry Nearing a Tipping Point
It has been a volatile and unpredictable year in global oil markets, with price signals clouded by a growing list of competing drivers. From geopolitical tensions to macroeconomic shifts, both bullish and bearish forces are at play, making it increasingly difficult for analysts and investors to form a clear outlook. Amid this complexity, one structural factor stands out: U.S. oil production. As we look toward the second half of 2025 and 2026, the trajectory of U.S. shale output could prove decisive in shaping the global supply-demand balance. The key question now is whether the U.S. oil industry is nearing a critical inflection point—one that could reshape the global supply landscape and exert lasting pressure on prices.
There are multiple ways to go about this question. But as oil production is a function of oil price, we will first look at the demand and supply side picture to determine whether demand will outpace supply, signaling a price surge. Secondly, Primary Vision’s Frac Spread Count and Frac Job Count both provide first-hand, real-time information on the number of active spreads in the shale basins and the actual number of completions, respectively. We will use that to determine the actual developments in the shale industry. Lastly, using data from our Efrac monitor, we will look at what future plans the major operators have made.
The latest Oil Market Report (OMR) by the IEA sheds some light on the demand-supply dynamics. The report predicts a 1.6 mbpd increase in supply in 2025, with an additional increase of 970,000 bpd in 2026. In regard to non-OPEC production (the topic in discussion), the expected supply is 1.3 mbpd in 2025, with an additional supply of 820,000 bpd in 2026. Referring to OPEC+, which has further disturbed the supply-demand dynamic with its announcement that it will add 410,000 bpd starting in June, the report predicts an addition of 310,000 bpd in the current year and 150,000 bpd in 2026.
Source: Oil Market Report, IEA, May 2025
The above clearly shows that for the remaining year and in 2026, excess supply will remain an issue. According to the author’s calculations, we might see a supply overhang of anywhere between 800,000 bpd to 1.2 mbpd for the current year, assuming the current macroeconomic outlook remains intact. It is highly tempting to mention something about the global economic indicators, but to make sure we stick to the theme, the following is a snapshot of the Market Sentiment Tracker (compiled weekly). For most of the weeks, the bearish factors have outweighed the bullish ones.
The Energy Information Administration (EIA) also expects a slowdown in global oil consumption as economic activity is expected to contract. It sees the world economy growing by 2.8%, the lowest since 2008. S&P Global foresees global oil demand growth averaging 750,000 bpd in 2025, down 500,000 bpd—the slowest growth in years.
Source: EIA
Now turning to the exclusive data by Primary Vision, let’s look at what the FSC and FJC are showing us. The Frac Spread Count (FSC) has been trending lower and recently registered a fall of 7 on a WoW basis. Even when viewed on a YoY basis, we see that the number has fallen by a considerable 71. However, this did not translate into a fall in U.S. oil production, which is expected to average 13.46 mbpd in 2025—an addition of 252,000 bpd YoY. While the rate of growth has slowed, it has still registered growth, and at the current levels, U.S. oil production is a formidable force in the global oil calculus.
Source: Primary Vision
This is where we look at the Frac Job Count—which refers to the actual number of completions. On a WoW basis, the number of completions registered an increase of 10, while it has held steady even when evaluated on a YoY basis. This also complements the aforesaid estimates regarding growing U.S. oil production. When we look at various operators through our Efrac monitor, it also shows mixed results. For instance, EOG expects to increase its activity in the coming months, while others, such as Chesapeake and Pioneer Natural Resources, appear to be more price sensitive.
Service providers like Halliburton, TechnipFMC, and Baker Hughes have also shown concerns regarding their future planning. For instance, Halliburton expects tariffs to negatively influence their margins in the current and upcoming quarters. TechnipFMC is bullish about its revenues as the majority of it comes from outside U.S. onshore, but it is also taking into account the uncertainty arising from tariffs.
So, what is the verdict?
Oil markets in 2025 and 2026 seem to be oversupplied. One of the key factors that will further determine the direction of oil prices is the production increase by OPEC+ members. Another important point to notice is that, this time around, the purpose of the production increase is to improve compliance within OPEC.
Therefore, the possibility of a lower-for-longer oil price remains a very real one. While the Frac Job Count (FJC) has stayed stable YoY despite falling rig counts and Frac Spread Count (FSC), a sustained lower price environment could trigger a fall in the former. If this happens, it could lead to a fall in U.S. oil supply.
If WTI remains range-bound between the $55–$65 range through the second half of 2025, actual job completions will be adversely impacted. This is an interesting development to look out for. So, while we might not be at the tipping point right now, we are also not far away from it.
By Osama Rizvi for Oilprice.com
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