Just a few months ago, oil prices were above $50 and there was a swagger in the step of the U.S. shale industry.
But that has changed, now that prices have dipped precariously close to $40 per barrel, and threaten to go even lower. Many producers consider $40 as the line they cannot cross and still make a profit, so it will impact U.S. oil production if prices remain low.
"These are financial decisions. What was becoming unbridled confidence will be less unbridled," said Daniel Yergin, vice chairman of IHS Markit.
West Texas Intermediate futures for August were trading at just above $43 per barrel Tuesday, and prices were down about 2.5 percent, as the July contract expired. WTI has fallen about 20 percent from the peak it made in January, just as OPEC and non OPEC producers began a program to cut production by 1.8 million barrels a day.
"It's clear the oil price is not only measuring supply and demand. It's taking the temperature of sentiment and sentiment is overwhelmingly negative now," said Yergin.
The agreement reached late last year between OPEC, Russia and other producers temporarily kept oil in the $50s per barrel, and that encouraged U.S. shale drillers to crank up production. U.S. oil output jumped, reaching 9.3 million barrels a day this month, after troughing at about 8.5 million barrels a day last September.
Oil output, however has been rising, due to higher production in the U.S. and increased output from Libya and Nigeria.
"The global guys have been much more restrained. The U.S. guys are the ones that have been spending like crazy because of the combination of shale; the better wells they are drilling and the lower costs they've had. The U.S. guys built a better mouse trap but even that better mouse trap gets challenged," said Daniel Pickering, president of Pickering, Tudor, Holt.
Pickering's firm will be hosting a two-day industry conference in Houston starting Wednesday, and he expects to hear a changed mood from producers.
"We may get some signs that U.S. guys are going to take a breather on spending," said Pickering. "U.S. rig count is up 22 weeks in a row. One of these days we're going to have a down rig count because the U.S. guys are scared enough."
A number of analysts said U.S. crude should hold above $40, but it could fall into the $30s briefly.