A slowdown in drilling activities in the Permian Basin, the largest U.S. shale oil production region, should provide some underlying support to the price of crude oil, Goldman Sachs said in its most recent energy note released Monday.

The U.S. investment bank said its analysis and latest industry data showed total U.S. rig and frac spread counts that includes Permian activities decreased 14% and 22% from a year ago, respectively, a sign that tight oil production continues to extend its rapid decline.

In shale oil production, frac spread count refers to the number of crews actively working on hydraulic fracturing or fracking of shale.

The Permian Basin, located in western Texas and southeastern New Mexico, has the lowest operating costs among all shale regions because its vast size allows the use of cheaper and more efficient techniques like horizontal drilling.

Meanwhile, there are signs that other U.S. shale oil production regions with higher breakeven costs such as North Dakota are also reducing drilling activity, driven by uncertain oil prices amid a U.S.-China trade war and a possible U.S.-Iran nuclear deal, Goldman said.

Several U.S. shale producers including Diamondback Energy and ConocoPhillips recently said lower oil prices have prompted them to reduce their drilling and well completion activity and slash their capital expenditure.

Goldman now expects crude oil production in the lower 48 U.S. states to decline by 400,000 b/d in the fourth quarter of 2026 compared to Q4 2024.

In early May, the Energy Information Administration cut its forecast for U.S. crude production over the next two years, citing declining oil prices and oversupply.

Over the weekend, Goldman affirmed its earlier forecast for an average Brent crude price of $60/bbl and an average West Texas Intermediate price of $56/bbl for the rest of 2025. It attributed the weaker oil prices in the second half of the year to the possibility of more Iranian oil supply and higher global crude stocks.

This content was created by Oil Price Information Service, which is operated by Dow Jones & Co. OPIS is run independently from Dow Jones Newswires and The Wall Street Journal.

   --Reporting by Frank Tang, ftang@opisnet.com; Editing by Michael Kelly,   mkelly@opisnet.com 
 

(END) Dow Jones Newswires

May 21, 2025 10:40 ET (14:40 GMT)

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