US frackers were already facing a global oil supply glut. Trump’s Venezuelan dream could make it worse

US shale-oil producers were already contending with oil prices at four-year lows. News that they may soon face a significant competitor in their back yard likely wasn’t how frackers wanted to greet 2026.The US capture of Venezuelan president Nicolaá Maduro and his wife, Cilia Flores, hit the share prices of independent shale-oil producers, such as Diamondback Energy and Devon Energy, last week.Over the last 20 years, the US fracking industry has built itself into the main driver of domestic oil production: it accounted for 64% of total US crude oil production in 2023. With average production levels of 13.6m barrels a day (BPD), the US is the world’s largest crude-oil producer.It will take years for Venezuela’s production to ramp up, limiting the near-term impact on US suppliers, but Donald Trump has made clear he wants firms to move quickly.The development comes at a difficult time for the industry, which is pressured by a global glut of oil. Higher supplies come from an unwinding of 2023 voluntary production cuts by some Organization of Petroleum Exporting Countries (Opec) and growth in non-Opec countries, including Argentina, Brazil, Canada, China and Guyana.Oil prices have been trending down since passing $100 in early 2022, when Russia invaded Ukraine. With supply overwhelming demand, nearby Nymex West Texas Intermediate crude-oil futures prices – agreed rates for assets to be bought at a later date – are trading at about $56 a barrel. Longer-dated futures contracts for the US oil benchmark forecast prices range between $56 and $57 a barrel until June 2028.Price of oil per barrel over the last five yearsUS fracking is expensive, so the industry will not welcome more price pressures. Potentially, this is a threat to Republicans who have championed fracking in swing states like Pennsylvania, where the shale revolution has been an economic boon.For now, the picture is as murky as a barrel of oil.Rob Haworth, senior investment strategy director at US Bank Asset Management Group, says any impact Venezuela has on US producers is a matter of timing. The US oil market is currently “acting like a reasonably supplied market with expectations that supply continues to increase, which keeps dampening those oil prices”, he said.Whether Venezuelan production resumes as projected is debatable, but one saving grace for US producers is that Venezuelan oil is heavy, and requires more processing than the light oil the US pumps. That makes Venezuelan petroleum less of a competitive threat to the US, since refiners globally can use light oil, says Peter McNally, global head of sector analysts at Third Bridge. Still, Venezuela’s potential output adds to the growing global glut.The economics of US oil production, when oil is about $57 a barrel, are troublesome in the longer term. The Federal Reserve Bank of Dallas estimates that breakeven prices for existing wells, in both shale and non-shale production, are between $26 and $45 a barrel, but that breakeven rises to between $61 and $70 for any newly drilled wells.Despite sluggish returns, the shale-oil industry is in better shape than in 2020. Producers’ balance sheets were already laden with debt when prices briefly turned negative during the Covid lockdown, says Rob Thummel, senior portfolio manager at Tortoise Capital.Many smaller producers went bankrupt. Those that survived started to focus on generating cashflow and return on invested capital, rather than hiking production. That capital discipline means companies are in better fiscal shape to weather lower oil prices, and are likely to keep a close eye on the bottom line, Thummel says. “What that means is they’re going to cut back on spending and [rein in] production.”The difficult times in 2020 ushered in consolidation, and the industry became dominated by oil majors like ExxonMobil and ConocoPhillips, rather than the independent producers that started up during the initial hydraulic fracturing oil boom in the early aughts. Sustained lower prices could spell problems for the numerous small, private drillers, especially if Venezuela’s oil comes online, says Mark Malek, chief investment officer at Siebert Financial.“The overall long-term implication is it’s definitely negative for the … run-of-the-mill frackers, because you’re going to see more supply, and that supply is clearly going to put pressure on the fracking industry,” he says.Companies are likely to keep output flat in 2026. The Energy Information Administration, the US Department of Energy’s statistical arm, estimates 2026 production to average 13.5m BPD, down slightly from 2025’s 13.6m-barrel record output – the first production drop in four years.Stewart Glickman, director of fundamental research at CFRA Research, says he’s slightly concerned oil production in the US mainland, referred to as the Lower 48, may be peaking. Capital expenditures are down about 40% from 2014’s peak, as companies relied on technological improvements to increase output. Since shale-oil production declines quicker than traditional drilling, Glickman says the US might be closer to start seeing overall production falling.“Instead of, 13.5 [million BPD] becoming 14, becoming 14.5, maybe we start to get a little bit of cresting and slight decline, because the lack of reinvestment is eventually going to catch up with you,” he says. “There’s a lot of moving parts, and now you add Venezuela on top it, and the longer-term risk.”