The Return of the Price War

In a shocking reversal, OPEC+ announced a 500,000 bpd production increase effective January — directly contradicting previous commitments to support prices. Saudi Arabia led the push, citing market share concerns over U.S. shale production and weakening Chinese demand. The decision caught traders completely off guard, triggering the largest single-day drop since 2022. West Texas Intermediate fell below $65 while Brent crude tested $68 support levels. Energy stocks were hammered with Exxon down 6%, Chevron 5.5%, and SLB plunging 9%.

Shale Under Threat

The move has reignited fears of a prolonged price war that could drive U.S. shale producers out of business. Meanwhile, refinery margins have collapsed as abundant supply meets softening demand from China's property crisis and global economic slowdown. U.S. shale companies that survived 2020's negative prices now face another existential threat. Many operators with high debt loads and breakeven prices above $70 may be forced into bankruptcy or consolidation. The energy transition narrative has taken a major hit as cheap oil undermines electric vehicle adoption rates.