U.S. shale drillers are scaling back as crude prices drift into the red zone for profitability, according to Quantum Capital Group’s Dwight Scott. With West Texas Intermediate (WTI) hovering near $65, private operators are seeing diminishing returns on new drilling activity.
“In the mid-$60s, you get dangerously close to where oil prices don’t really drive appropriate returns for new drilling,” Scott said in a Bloomberg TV interview on Wednesday. WTI has dropped 8% since the start of the year and sat at $65.82 on Wednesday. Scott, who recently joined Quantum from Blackstone, believes the slowdown is temporary, but concedes that tariffs and mounting uncertainty have throttled activity.
That pessimism is echoed in the Dallas Fed’s Q2 Energy Survey, which showed oil and gas business activity turning negative again. The headline index dropped to -8.1, with oil production falling to -8.9 and natural gas to -4.5. Service providers took the brunt, with margins collapsing and cost pressures intensifying—input cost indices jumped to 40.0 while operating margins plummeted to -33.4.
Hiring is slowing too, and sentiment worsened across the board, with the company outlook index slipping to -6.4 and the uncertainty index soaring to 47.1—the highest since 2020.
The pullback is already reflected in the Baker Hughes rig count, which has shown a clear downward trend since spring, falling from 589 in early January to 537 today—a decline of about 9%.
Despite the gloom, operators still expect WTI to average $68 by year-end. But that’s a narrow margin above breakeven for many private producers, especially as oilfield inflation eats into returns.
In Scott’s view, the U.S. will remain a global oil and gas leader—but only if prices climb back above the mid-$60s. Until then, expect more hesitation than acceleration in the shale patch.
By Julianne Geiger for Oilprice.com
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