The production of shale oil in the United States may have peaked. Diamondback Energy CEO warns that the country's energy security may be at risk.

Diamondback Energy (FANG.US) CEO Travis Stice wrote to shareholders this week stating that due to the recent significant drop in oil prices, US onshore oil production may have already peaked, and will start to decline this quarter, shaking not only the US position as the world's largest fossil fuel producer, but also posing a threat to the country's energy security. According to Stice, US crude oil prices have dropped by about 17% since the beginning of the year. Market expectations for oil demand have quickly weakened due to concerns about the recession caused by President Trump's tariffs, while at the same time, OPEC+ oil-producing countries, led by Saudi Arabia, are significantly increasing supply. Stice pointed out that, adjusted for inflation, the current oil price level has only been seen in two quarters since 2004, excluding the abnormal fluctuations during the COVID-19 pandemic in 2020. "Therefore, we believe that the current commodity prices have pushed US crude oil production to a critical point," he wrote in the letter. "US onshore oil production is likely to have peaked this quarter and will start to decline." He noted that the decrease in industry activity is a signal of this trend. As one of the key developers in the Permian Basin, the largest oil and gas producing region in the US, Diamondback Energy is the third largest producer in the region and the sixth largest onshore crude oil producer in the US. Driven by expectations of US production cuts, WTI crude oil prices rose more than 4% on Tuesday to $59.56 per barrel. US Energy Security May Face Risks The "shale revolution" of the past 15 years has made the US the world's largest oil and natural gas producer, with production surpassing the combined total of Saudi Arabia and Russia. Stice pointed out, "This transformation has completely rewritten our economic landscape and brought about energy security in the early centuries that seemed unimaginable." But he warned that current oil prices, market volatility, and macroeconomic uncertainties are threatening the achievements of this energy transition. "To maintain daily production of 13 million barrels of crude oil in the US, or 6 million barrels in the Permian Basin, the capital expenditures required may exceed the current business model's capacity." In a conference call with analysts, Stice said, "We cannot predict the direction of global markets, but for the US market, we see very clearly that the current trend is slowing sharply and may turn into a drop in production." Clear Signals of Decreased Activity He added that the number of fracking crews in the US has decreased by 15% since the beginning of the year, with the Permian Basin seeing a 20% reduction. It is expected that by the end of the second quarter, the number of rigs used for oil and gas extraction will decrease by nearly 10%, and further decline in the third quarter. To respond to market changes, Diamondback Energy has cut its annual capital expenditure budget by about $400 million from previous highs, adjusting it to between $3.4 billion and $3.8 billion. Stice noted that the biggest cost pressure the company faces currently comes from the steel tariffs implemented by the Trump administration, which increase drilling costs by about 1% annually, or $40 million. However, he also stated that as business activities slow down in the future, the company will offset some of the cost increases by improving efficiency. Currently, Diamondback Energy has reduced three rigs and one completion crew, and plans to maintain this scale for most of the third quarter. The company plans to drill 385 to 435 wells and complete 475 to 550 wells this year.