From a global oil inventory crisis to the Permian restarting expansion, the US shale oil is facing its "final supplier moment".

One of the largest shale oil producers in the United States, Diamondback Energy Inc., has released its latest forecast data showing that as the Iran war drives up oil prices, drillers will add up to 30 rigs to the highest producing shale oil field in the United States by the end of this year. The Middle East geopolitical conflict that erupted on February 28 has severely disrupted the global energy market. Shipping through the Strait of Hormuz, accounting for around 20% to 30% of global oil and gas transportation, has almost come to a standstill, leading to supply shortages and driving up oil prices, with the international oil price benchmark Brent crude futures rising by a significant 50% in the first quarter. According to market statistics from Baker Hughes Co., as of last week, there were a total of 241 large rigs in the basin located in the major oil-producing areas of West Texas and New Mexico in the United States. Based on this calculation, drilling activity levels in the next eight months are expected to increase by at least 10%. This expansion will signal a dramatic turnaround for the Permian Basin, indicating the potential for a significant reversal of the three-year decline in rig numbers. During this period, with relatively low international oil prices, improved efficiency among drillers, and industry consolidation leading to a decrease in the number of large oil and gas type operating companies, the number of rigs has continued to decline. This change may lay the foundation for a new round of growth in the region, as production growth in the area has already started to slow down. As shown in the figure above, there has been a resurgence in oil and gas production in the Permian Basin in the United States, with a 16% decrease in rig count over the past year. The 50% surge in oil prices triggers a "re-expansion" of the Permian Basin, with the United States oil returning to the global core. Since the official war between the U.S. and Israel against Iran in late February, international oil prices have risen by over 50%. With the Strait of Hormuz, a key global energy transportation route, effectively closed, global oil stocks, including both crude oil and refined products, are being rapidly depleted. However, as the United States becomes the "last major oil supplier" globally, its producers are struggling to keep up with demand, and domestic inventories in the U.S. are also declining. "This is clearly a very serious situation, with a lot of oil supply exiting the market," said Kaes Van't Hof, CEO of Diamondback Energy, in a conference call with analysts and investors on Tuesday. "If this is not enough to signal an increase in production in regions like the Permian Basin, which have a shale oil supply advantage, then I don't know what is." The U.S. oil and gas giant, headquartered in Midland, Texas, with one of the largest oil and gas assets in the Permian Basin, had previously announced plans to add up to three rigs locally this year. Van't Hof stated on Tuesday that the company has heard that private operators have already been increasing their rig count in the frontline and Midland areas. Diamondback's executive is the latest American oil executive to warn that the global oil supply-demand market is nearing a turning point due to the ongoing depletion of global oil and gas stocks. "This means that the importance of the U.S. oil supply system for the global energy market is more important than ever before," said Van't Hof. In the extreme situation where the Strait of Hormuz is effectively "semi-blocked" and around 20% of global crude oil trade flow is hindered, the global energy system has experienced a structural breakdown, with rapidly depleting inventories and extremely limited alternative transport routes. In this context, U.S. shale oil, especially in the Permian Basin, becomes the only source of marginal supply capable of rapid production increases in the short to medium term, reinforcing its role as the "supplier of last resort." The essence of this position is not that production surpasses that of the Middle East, but that when "critical gaps appear, only the U.S. can fill them" with its structurally scarce capability. However, at the same time, the view that the U.S. oil is returning to the global core is still limited: the current crisis exposes the fact that the global economy still heavily depends on low-cost oil from the Middle East and sea transport routes. Even if the U.S. accelerates production, it can only delay rather than fill the global supply-demand gap once the Strait of Hormuz remains restricted. A more accurate definition is that the U.S. oil system has transitioned from being an "important supplier" to a stabilizer and marginal pricing center of the global energy system. Oil market buffers are in urgent need. The latest public reports show that traffic through the Strait of Hormuz is still close to a trickle: only about six ships passed through within a 24-hour period around April 29, far below the normal level of about 125-140 ships per day before the war; Goldman Sachs also warned that global oil stocks are approaching an eight-year low, with particularly thinning buffers for refined products. In other words, the market has transitioned from the first stage of "geopolitical risk premium" to the second stage of "inventory depletion trade." The real significance of the synchronous warnings issued by global energy giants ExxonMobil, Chevron, and ConocoPhillips is that the global oil market is losing its three firewalls: commercial inventories, strategic reserves, and floating stocks. As long as low flows continue in the Strait of Hormuz, with each day of inventory consumption, the market is closer to transitioning from "reservoir filling" to "price destruction demand rebalancing." U.S. gasoline inventories are also at risk of declining, with Morgan Stanley predicting that U.S. gasoline inventories could fall to their lowest level in the same period in modern records by the end of August. This means that the impact is not just a problem of Brent or WTI prices, but is spreading to refinery profits, refined products, transportation costs, and consumer consumption. Diamondback's signals of increased production in the Permian Basin underscores the key note of the return of the U.S. oil system to the global core in this crisis: its plans to add 2-3 rigs this year, maintain a production of over 520,000 barrels per day, and the market is also discussing a potential increase of about 10% in the number of rigs in the Permian Basin by the end of the year. This indicates that U.S. shale oil is once again playing the role of the "global last marginal supplier" - when the Middle East channels are blocked and OPEC+ (OPEC Plus) production increases are weakened by transportation bottlenecks, the Permian Basin becomes one of the few sources that can quickly respond to high oil prices. However, from a macro strategic perspective, U.S. shale oil can only "buffer the impact," not "reverse it." The expansion of shale oil production is constrained by drilling rigs, manpower, pipeline transportation, capital discipline, and investor returns, while the Strait of Hormuz serves as a systemic hub for global energy transportation; therefore, the increase in production in the Permian Basin is more like a valve delaying the bottoming out of stocks, rather than a complete solution to the replacement of the Middle East export system. Short-term fluctuations in oil prices may occur due to ceasefires, diplomatic progress, or the temporary suspension of U.S. escort operations, but as long as normal shipping levels are not restored, the real contradiction in the oil market is that the "physical supply gap is greater than financial market pricing."