Oil prices plunged by 16% but it did not change the ambition to expand production! Western oil giants collide head-on with OPEC+ production increase plan.

Despite a 16% drop in international oil prices in April and the possibility of further production increases from OPEC+, Western major oil producers are sticking to their production growth plans. Exxon Mobil Corporation (XOM.US), Chevron Corporation (CVX.US), Shell (SHEL.US), and Total (TTE.US) all maintained their original capital expenditure plans when announcing their first-quarter financial reports. Only BP p.l.c. Sponsored ADR (BP.US) reduced spending under pressure from activist investor Elliott Investment Management LP. The firm stance of these oil giants contrasts sharply with the current oversupply in the market. Threats to global economic growth from tariff policies, reduced energy demand, and OPEC's unexpected production increase decision last month have pushed oil prices to a four-year low. More alarmingly, OPEC+ member countries are reportedly discussing an additional production increase of around 400,000 barrels per day in June, in preparation for the online policy meeting scheduled for Saturday. The position of international oil companies in increasing production in the face of falling prices contrasts sharply with U.S. shale oil producers. The latter typically require oil prices above $60 per barrel to break even. On Friday, U.S. WTI crude oil fell 1.6% to $58.29 per barrel. Shale oil producer EOG Resources, Inc. (EOG.US) announced on Thursday a reduction in its production increase plans for 2025. President Trump has repeatedly urged domestic producers to increase production, not only as a key component of his U.S. Energy Corp.-led strategy but also to help keep oil prices in check. On Friday, he touted low oil prices as a significant achievement in his first one hundred days in office. Exxon Mobil Corporation and Chevron Corporation reaffirmed their plans to increase production by about 7% and 9% respectively this year. Both companies are looking to the expansion project in the Tengiz field in Kazakhstan (which has recently been completed) for growth. Kazakhstan has repeatedly violated its OPEC production quotas, frustrating Saudi Arabia and leading them to increase production to punish non-compliant oil-producing countries. Rystad Energy analyst Mukesh Sahdev stated in a report on Friday, "U.S. companies like Exxon Mobil Corporation and Chevron Corporation in Kazakhstan could be a key driver of supply growth. This raises questions about whether the U.S. is secretly pressuring OPEC+ to increase production." Most of Kazakhstan's oil production is operated by foreign companies, and there is little indication of any measures to limit the country's oil production. Chevron Corporation CEO Mike Wirth stated that during a recent meeting with Kazakhstani leaders, he did not discuss the possibility of reducing production in the Tengiz project, which is expected to increase production to 1 million barrels per day later this year. He said on Friday, "The oil we produce (in Tengiz) is very valuable to the government, important for its fiscal balance, and historically, this oil has never been cut." Shale producer EOG in the Permian Basin has cut its annual budget by $200 million and lowered its expected oil production growth rate from 3% to 2%. Morgan Stanley analysts called this move the "canary in the coal mine" (referring to an early warning signal of danger). More shale producers will report earnings next week, including DiamondBack Energy Inc. (FANG.US), Occidental Petroleum Corporation (OXY.US), and ConocoPhillips (COP.US). Houston-based drilling contractor Nabors Industries (NBR.US) stated this week that according to a survey of nearly half the industry, shale producers plan to cut drilling rigs by 4% by the end of the year. However, these production cuts are expected to have limited impact on global supply. Evercore ISI analyst Stephen Richardson said the U.S. shale oil industry is "indicating that with the market digesting a series of macroeconomic indicators, adjustments to low oil prices will be moderate at best." In any case, efforts by independent operators to cut U.S. shale oil production are likely to be offset by Exxon Mobil Corporation and Chevron Corporation, which have grown rapidly in recent years and now account for a much larger share of total production. Chevron Corporation increased production by 12% over the past year to nearly 1 million barrels of oil equivalent per day, while Exxon Mobil Corporation aims to reach 1.5 million barrels after acquiring Pioneer Natural Resources Company, a 25% increase. With the global economy expected to slow down and demand affected, all of these factors together mean a significant oversupply of oil. Nick Hummel, an analyst at Edward Jones & Co. in St. Louis, stated, "Given the level of economic uncertainty, it is difficult to see any catalyst that could accelerate oil and natural gas demand in the next two quarters. We may be in a mild commodities price environment in the near to medium term."