BusinessInternational AnalysisWednesday, May 21, 2025, 21:04 (GMT+7)
OPEC+ strives to regain share from the US
After 3 years of production cuts, OPEC+ has increased oil again, partly to regain market share lost to US shale oil companies.
On May 3, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to provide a plan to rapidly increase production in June, with a capacity of 411,000 barrels per day. Thus, in total, in the second quarter, OPEC+ will add 960,000 barrels per day to the market.
This production increase was initiated by Saudi Arabia. Analysts say this is not only to punish OPEC+ countries that benefit from high prices but violate production quotas. Their second goal is to put pressure on the US shale oil industry to regain market share.
OPEC’s share of the global oil market, once responsible for more than half of global oil production, has fallen from 40% a decade ago to less than 25% this year, according to the group. By contrast, the US share has risen from 14% to 20%. Together, the OPEC+ group now supplies about 48% of the world’s oil.
A decade ago, OPEC’s oil price war against the US shale industry failed. New drilling technologies and techniques have allowed US companies to cut costs, compete at lower prices, and expand their market share.
However, the US hard-rock industry is now more vulnerable to a new price war. Over the past three years, these companies’ production costs have increased. Profits have also fallen as oil prices have fallen, partly due to economic activity from President Donald Trump’s import tax policy.
Saudi Arabia’s Crown Prince Mohammed bin Salman and Russian President Vladimir Putin. Photo: AFP
Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin. Photo: AFP
Reuters cited industry sources as saying that the goal of regaining market share was one of the reasons for OPEC+’s decision on May 3. However, none of the sources confirmed that this was a price campaign. To hurt US hard oil producers, OPEC+ would need to bring prices below $55-60 a barrel, instead of the current $65, Reuters sources said.
OPEC+ said it based its decision on “stable market fundamentals, as reflected in low storage availability”. The group has been cutting production since late 2022, targeting a supply glut in the market that would cause prices to fall, hurting member countries that rely on oil exports. However, the plan has not had much effect. So far this year, the group has cut 5.86 million barrels a day, equivalent to 5.7% of global demand. OPEC+ output has been gradually increasing since April.
However, OPEC+’s production increase also comes in the context of the depletion of the highest-quality oil fields in the Permian – the largest oil field in the US -. As companies have to exploit other areas, production costs have increased. The discovery is also putting pressure on this activity.
According to the first quarter survey of more than 100 oil companies in Texas, New Mexico and Louisiana by the Federal Reserve (Fed) Dallas branch, hard rock producers currently need an average price of US$65 a barrel to make a profit. Meanwhile, Saudi Arabia’s oil production costs are only about US$3-5 a barrel. Russia’s is about US$10-20, according to the analysis.
“It’s time to regain lost ground,” an OPEC+ source told Reuters. Saudi Arabia has consistently said its low production costs will help it stay in the endgame in any dispute.
Reuters sources said Russia is also increasingly in line with Saudi Arabia’s strategy of increasing production to punish OPEC+ members who exceed their quotas, while also putting pressure on rivals, including hard rock oil companies.
“The main reason for the imbalance in the oil market is the increase in US hard rock oil production,” a senior Russian source said. The source also said that bringing oil prices below $60 a barrel is in Moscow’s interests and could benefit its oil exports. Currently, the G7 prohibits companies from providing services to Russian oil if export prices exceed $60 a barrel.
After trading in the narrow range of $70-80 for most of the year, Brent crude oil prices last month fell to a four-year low of $58 a barrel. The reason is that OPEC+ has started to increase production and consultants are worried about global economic development.
Linhua Guan – CEO of Surge Energy America commented that this time is very unfavorable for US oil companies. Surge Energy America is one of the largest private oil companies in the country, operating in the Permian Basin.
Guan said that US oil products this year may have decreased, as high-quality fields have been exploited. In addition, US import tax policies and market fluctuations have also pushed many businesses to the brink of bankruptcy.
“The increase in OPEC+ production is shrinking the market share of US shale oil companies,” he said.
Earlier this month, the number of drilling rigs in the US fell to the lowest level since January, according to data from the service company