Oil prices surge 68%, breaking the "restraint" spell. U.S. shale oil drillers finally start increasing production.

Zhitong Finance APP learned from multiple analysts that, since about five weeks ago when the U.S. and Israel launched attacks on Iran, crude oil prices have surged cumulatively by 68%, and U.S. shale oil drillers are expected to overcome their long-standing cautious stance and increase oil production.

American Petroleum Institute (API) Chief Executive Officer Mike Sommers said in an interview recently: “In the coming months, high oil prices will undoubtedly drive growth in U.S. production.”

Enervus expects that this year the total supply of U.S. oil will increase by 240,000 barrels per day to 13.9 million barrels per day, reversing the 100,000 barrels per day decline that had been forecast before the war due to concerns about an oversupply in the market. The initial incremental increase will come from completed oil wells (DUC) that have already been drilled but have not yet been hydraulically fractured.

Rystad analysts currently expect U.S. production in the 48 contiguous states to increase by 191,000 barrels per day, reversing the 80,000 barrels per day decline that had been forecast before the war.

Citigroup said that some of the major shale oil companies will deploy more drilling rigs in the second half of this year, meaning that by 2027 major operators will increase production by more than 100,000 barrels per day. The bank forecasts that, together with further expansion by unlisted drilling contractors, by 2028 U.S. shale oil could add 815,000 barrels per day of supply.

TD Cowen analyst Jason Gabelman said that Exxon Mobil (XOM.US) and Chevron (CVX.US) are “more likely than” their peers to increase shale oil production. Exxon Mobil had previously set an aggressive production ramp-up plan through 2030, while Chevron, after years of growth, had guided production into a “plateau.”

Harold Hamm, Chief Executive Officer of Continental Resources, became last week the first head of a major shale oil company to publicly commit to increasing production.

On Monday, crude oil futures edged up slightly. Earlier, Trump said that Iran must agree to open the Strait of Hormuz by late Tuesday, otherwise he would threaten to attack Iran’s power plants and other civilian infrastructure.

Mizuho’s Robert Yawger said in a report: “The market is highly sensitive to the news flow, and is currently stuck in a dilemma: on the one hand, there are reports that a ceasefire is about to be reached; on the other hand, President Trump has threatened to attack its infrastructure if Iran does not open the Strait of Hormuz by Tuesday.”

On the New York Mercantile Exchange (Nymex), the near-month May crude oil futures contract closed up 0.8% to $112.41 per barrel, the highest settlement price since June 16, 2022; the near-month June Brent crude oil futures contract rose 0.7% to $109.77 per barrel; but Nymex’s near-month May natural gas futures contract fell 0.4% to $2.811 per million BTU, the second-lowest settlement price of the year.

Related ETFs include the U.S. Oil ETF (USO.US), the U.S. Brent Crude Oil Fund limited partnership unit (BNO.US), and others.