On August 29th, over the past decade, global crude oil supply growth has predominantly originated from U.S. shale oil producers, yet they remain unable to escape the influence of OPEC+, particularly Saudi Arabia's policy decisions. Recently, OPEC+ has accelerated the removal of production cuts, rapidly pushing over 2 million barrels per day into the market, leading to swift global inventory accumulation and downward pressure on oil prices. GTC Zehui Capital notes that this scenario has played out multiple times historically, often resulting in a "crude oil lake" that requires months or even a year to drain, with markets developing excessive confidence in supply elasticity in the short term, causing prices to decline significantly.

However, the other side of the cycle inevitably follows. As prices decline, an increasing number of producers choose to reduce capital expenditure and curtail onshore and offshore development activities, building momentum for future rebounds. GTC Zehui Capital believes that exploration and development investment is influenced not only by commodity prices, but supply costs and single-well productivity are equally critical. From historical experience, current oil prices are in a bottom phase. While further downside remains possible in the short term, long-term supportive factors are gradually accumulating: higher development costs and slowing production efficiency provide the foundation for future oil price rebounds.

Entering the second half of 2025, U.S. crude oil production growth has notably decelerated. According to EIA data, U.S. crude oil production for the week of August 8th was 13.327 million barrels per day, down approximately 2% from the December 13th, 2024 peak of 13.604 million barrels per day. The five major oil-producing states of Texas, New Mexico, North Dakota, Oklahoma, and Utah collectively contribute over 9.6 million barrels per day, demonstrating that shale oil remains the primary supply source. GTC Zehui Capital believes the trend of continuous growth has ended, with underlying factors including low oil prices, reduced drilling activity, depletion of premium acreage, diminishing marginal returns from technological improvements, and industry consolidation and supply chain cost volatility.

More importantly, the core contradiction in shale oil development is gradually emerging: costs continue to rise while single-well production improvements remain limited. Research data shows that in 2024, the world's largest group of non-OPEC publicly traded companies achieved only 3% annual growth in single-well production, one of the lowest levels in 14 years. Historical experience indicates that when single-well productivity growth slows, producers are forced to migrate to higher-cost reservoirs, thereby elevating marginal supply costs. If demand remains stable or grows, this dynamic will inevitably drive oil prices higher.

Technological innovation has partially delayed this trend. For example, horizontal well sections now commonly exceed 10,000 feet, with some breaking through 15,000 feet; fracturing stages have increased, higher proportions of proppant are injected into reservoirs, supplemented by AI-optimized pumping operations, transforming low-quality rock formations into high-producing zones. However, GTC Zehui Capital believes that while technological progress has improved capital efficiency, its sustainability remains debatable. Some major company executives suggest production can be maintained long-term, while other industry leaders believe U.S. shale production has peaked and will enter a declining cycle. Year-to-date data already shows production declines of hundreds of thousands of barrels per day, with market opinion remaining divided.

Looking ahead, the global energy landscape still requires massive investment to maintain supply stability. ExxonMobil's energy outlook report indicates that maintaining current production levels through 2050 reveals an obvious capital investment gap. GTC Zehui Capital believes this means that after experiencing short-term supply-demand mismatches and price volatility, the upstream energy sector's long-term prospects remain bright. Current oversupply is merely a temporary episode, and as development costs rise, single-well efficiency slows, and demand remains robust, the oil price center is expected to shift upward, creating a better profit environment for energy companies.