OPEC+ is ramping up oil production with the dual aim of disciplining overproducing members and regaining market share from U.S. shale producers, according to officials and sources briefed on the strategy. The coordinated increase by Saudi Arabia and Russia threatens to reopen a price war that could squeeze American drillers already hit by inflation, declining well quality, and market volatility.
Ten OPEC+ delegates and industry insiders told Reuters that retaking market share from U.S. shale was a key motivator behind the May 3 decision to accelerate output. Four sources said the move, while not officially a price war, was designed to push oil prices below $60 per barrel to discourage further U.S. shale growth. "The idea is to put a lot of uncertainty into plans by others with prices at below $60 per barrel," said one source briefed on Saudi thinking.
U.S. shale firms have grown increasingly vulnerable. The Dallas Federal Reserve reported this quarter that shale producers now require an average of $65 per barrel to break even, significantly above Saudi Arabia's $3-$5 and Russia's $10-$20 per barrel cost range.
OPEC+-comprising members of the Organization of the Petroleum Exporting Countries and allies like Russia and Kazakhstan-argued that "the current healthy market fundamentals, as reflected in the low oil inventories" justified the production boost. However, the broader context suggests strategic targeting of shale producers as well. "It is time to return lost market share," one OPEC+ source said.
The move comes as the best shale acreage in the Permian Basin has been exhausted, pushing U.S. drillers into more costly zones. Linhua Guan, CEO of Surge Energy America, warned, "OPEC+ hiking production is taking market share from U.S. shale producers." Guan added that U.S. production was already likely to decline amid shrinking top-tier inventory and trade policy-related volatility.
Oil prices have fluctuated amid these shifts. Brent crude rose 1.2% to $66.17 a barrel Wednesday, and West Texas Intermediate climbed 1.3% to $62.85, following reports that Israel may be preparing to strike Iranian nuclear facilities. "Such an escalation would not only put Iranian supply at risk, but also in large parts of the broader region," ING commodities strategists noted.
Iran, OPEC's third-largest producer, exports over 1.5 million barrels per day. An Israeli strike could disrupt this flow and potentially trigger retaliatory action from Tehran, including threats to block the Strait of Hormuz, a critical shipping lane for oil from Saudi Arabia, Iraq, the UAE, and Kuwait.
The rising output also reflects geopolitical calculations from Moscow. "The main source of oil market imbalance comes from U.S. shale growth," said a senior Russian source, who noted that keeping prices below the G7's $60 cap on Russian crude aids Kremlin exports.
Still, low prices carry risks for all producers. Saudi Arabia requires prices above $90 a barrel to balance its budget, while Russia needs above $77, according to IMF estimates. Yet Saudi officials reportedly believe prices around $60 remain "bearable," even if it means temporary borrowing.
The U.S. oil and gas rig count dropped earlier this month to its lowest since January, and major firms are reassessing their output plans. Diamondback Energy has already lowered its 2025 forecast, and ConocoPhillips warned that prices near $50 could trigger widespread cutbacks.
Meanwhile, Kazakhstan has defied OPEC+ discipline, with production increasing 2% in May despite pressure to reduce output. Analysts are closely watching the Energy Information Administration's stockpile data to assess further shifts in the market.
