Diamondback Energy Cuts $100M in Spending Amid 17% Oil Price Drop, Oversupply Fears

Diamondback Energy Inc., the largest independent oil driller in the Permian Basin, has signaled caution to the market, indicating that the global oil market may face an oversupply situation in the coming months due to changes in supply and demand dynamics. To mitigate potential risks, the company has announced a $100 million reduction in capital expenditures, along with a decrease in production expectations and a delay in some hydraulic fracturing operations. CEO Travis D. Stice emphasized in a statement released on Monday that this adjustment is a defensive strategy aimed at avoiding the pitfalls of forced production increases in a market characterized by ample supply and price pressures.

While the company did not explicitly mention OPEC+ policies, the organization's recent series of production increase plans have had a tangible impact on the market. Since mid-January, U.S. oil prices have cumulatively declined by 17%, directly linked to the actions of the world's largest oil-producing alliance to expand production capacity. According to the latest resolution, OPEC+ member countries approved an increase in daily oil production by 54.7 thousand barrels, reversing the significant reduction in 2023 a year earlier than originally planned. The Organization of the Petroleum Exporting Countries and its allies are accelerating the restoration of production capacity to regain market share.

The International Energy Agency's latest data indicates that while oil demand remains stable this year, the global market will experience a significant oversupply of 2 million barrels per day in the fourth quarter due to increased supply from the Americas. Stice, in an open letter to investors, noted, "The increase in global oil supply in the second half of the year cannot be ignored, and the company's operational strategy for the remainder of 2025 will focus on expenditure control and stable production." This statement aligns with the company's May prediction that "U.S. shale oil production has peaked." Since this forecast was released, drilling activity in the U.S. has decreased by 12%, reaching a four-year low.

Current market signals suggest that, against a backdrop of slowing demand growth, the decision by major oil-producing countries to continue releasing production capacity is reshaping the supply-demand balance. As a benchmark enterprise in North American shale oil development, Diamondback's strategic adjustments reflect a cautious assessment of market trends and the industry's survival wisdom in the face of price volatility cycles. By proactively controlling investment pace and production scale, this Permian Basin giant is attempting to build a more resilient operational defense in anticipation of an oversupply.