WTI crude oil futures slipped below $60/bbl last week for the first time in four years amid growing market uncertainty. Investors face twin pressures from OPEC+’s planned production increase of 411 Mb/d in May ’25, plus fears that a brewing trade conflict could erode oil demand.
The WTI May ’25 contract traded near $61.60/bbl Monday afternoon (April 14). Markets rebounded some last Thursday after President Trump announced a 90-day pause on plans to place tariffs on most imports. But oil prices remain about $10 lower since the start of April, while contracts in the backwardated WTI curve currently trade below $60 starting in Sept ‘25.
East Daley Analytics’ Production Scenario Tools anticipate minimal impact on near-term oil production, with some bearish risk to longer-term supply as drilling activity responds to lower prices. Users of our production models can easily run sensitivities at the basin and sub-basin level. Forward price strips, rig counts, and other variables that impact production can be altered to analyze current dynamics.
A newly drilled well typically takes several months to begin producing, and any rig reductions would not impact production until late 3Q25 at the earliest. Many public producers would also hesitate to immediately adjust rig activity or 2025 production guidance, especially when operations are supported by commodity hedges and term rig contracts.
We expect any near-term decrease in rig activity would likely come from producers drilling outside their top-tier acreage, or in basins with more challenging economics. East Daley has noted that rig activity in the Permian Basin historically is less reactive to oil prices due to its more resilient economics.
EDA has estimated the breakeven well economics across the leading US basins. Our work indicates that WTI pricing of ~$60/bbl can still lead to economic development in many plays (see chart above). However, producers with acreage outside the core of a basin face more marginal drilling economics if price weakness persists. – Gage Dwan and Trever Morley.
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