Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Independents and OPEC accused of illegal coordination in oil price manipulation lawsuit, (May 15, 2025)

By George Basharis, J.D.

Class action claims major U.S. shale producers colluded to restrict output and inflate crude prices, pointing to FTC investigations as supporting evidence.

A class action lawsuit filed in the United States District Court for the District of New Mexico alleges that major U.S. shale oil producers and their executives engaged in a conspiracy with OPEC to limit domestic crude oil production, artificially inflating West Texas Intermediate (WTI) crude oil prices and related futures contracts. The complaint, filed by Chicago-based trading firm 3Red Partners LLC, claims these actions violated both the Sherman Act and the Commodity Exchange Act (3Red Partners LLC v. Permian Resources Corp., No. 1:25-cv-00447-MLG-LF (D.N.M. May. 12, 2025)).

Alleged conspiracy. According to the complaint, eight leading independent shale oil producers—Permian Resources Corporation, Expand Energy Corporation (formerly Chesapeake Energy), Continental Resources, Diamondback Energy, EOG Resources, Hess Corporation, Occidental Petroleum, and Pioneer Natural Resources—along with individual defendants Scott Sheffield (Pioneer’s former CEO) and John Hess (Hess Corporation’s CEO), formed a cartel to coordinate production decisions that began no later than January 2021.

The lawsuit alleges that these independents, which collectively account for approximately 16.2 percent of U.S. total crude oil production, conspired amongst themselves and with OPEC to withhold production despite rising oil prices—a strategy that would be economically irrational for any single producer acting independently. The complaint describes how, rather than competing for market share by increasing production when prices rose (as would be expected in a competitive market), the defendants maintained what they called “capital discipline” and “production restraint” to keep prices artificially high.

Development of the alleged conspiracy. The complaint provides extensive background on the evolution of the relationship between U.S. shale producers and OPEC. It describes how the “Shale Revolution” that began in the early 2000s dramatically altered global oil markets by turning the U.S. into a major crude oil producer. This development challenged OPEC’s traditional role as the dominant “swing producer” with the ability to control global oil prices.

Initially, OPEC responded with a “price war” from 2014 to 2016, maintaining high production levels to drive down prices to make U.S. shale production economically unviable. When this strategy proved unsuccessful, the complaint alleges that OPEC changed tactics and began a years-long campaign to bring U.S. independents to the “table on pricing.”

The complaint details a series of meetings and communications between OPEC officials and executives from the defendant companies beginning in 2017, primarily occurring on the sidelines of the annual CERAWeek energy conference in Houston. These interactions allegedly evolved from information sharing to active coordination of production decisions by 2021.

Implementation of the agreement. The lawsuit claims that when oil demand surged as the world emerged from the COVID-19 pandemic in early 2021, the defendants departed from their historical practice and economic self-interest by collectively limiting production growth. The complaint cites numerous public statements from company executives signaling their commitment to “discipline” and “restraint” despite rising prices.

The complaint points to data showing that between 2021-2023, the defendants’ production growth rate averaged just 14 percent, compared to 63 percent during the 2017-2019 period, despite average crude oil prices increasing from $55.01 to $78.42 per barrel. This restrained growth occurred even as the defendants' breakeven prices were around $40 per barrel, making production highly profitable.

The lawsuit alleges that this coordinated restraint directly impacted WTI futures prices by limiting the supply of crude oil flowing to the Cushing, Oklahoma settlement hub—the delivery point for WTI futures contracts. The complaint explains how Cushing serves as a key nexus for U.S. crude oil markets, with over thirty inbound and outbound pipelines and sixteen major storage terminals. It states that over 60 percent of the inbound pipeline capacity to Cushing comes from production areas where the defendants have significant operations.

Recent regulatory investigations. The complaint cites recent FTC actions as supporting evidence of collusion. In May 2024, the FTC reached a consent decree with ExxonMobil in connection with its acquisition of Pioneer Natural Resources, barring Scott Sheffield from joining Exxon’s board based on evidence of his “years-long efforts to fix the price of crude oil.” According to the complaint, the FTC revealed that Sheffield had been exchanging WhatsApp messages and other communications with high-ranking OPEC officials and U.S. competitors discussing oil pricing, output, and coordinated production restraint.

Similarly, on September 30, 2024, the FTC reached a consent decree with Chevron regarding its acquisition of Hess Corporation, with FTC Chair Lina Khan explicitly linking the two cases, stating that they represented “an important step towards ensuring that U.S. oil producers are serving as a competitive check on OPEC+ rather than subordinating their independent decision-making to the goals set by a cartel.”

The complaint also references ongoing investigations by the FTC and Congressional committees into potential collusion among U.S. oil producers and OPEC.

Alleged impact on markets. The lawsuit claims that the defendants’ conduct had direct effects on WTI futures markets, causing artificial prices that harmed the plaintiff and other market participants. It alleges the defendants violated Section 1 of the Sherman Act through a per se illegal price-fixing conspiracy and violated the Commodity Exchange Act by manipulating the prices of WTI crude oil and related futures contracts.

The complaint identifies numerous plus factors indicating collusion, including conduct against economic self-interest, opportunities to communicate through industry associations and conferences, parallel behavior in production decisions, and the defendants' own statements about maintaining “discipline.” It also notes the defendants’ common shareholders may have incentivized coordination rather than competition.

The lawsuit seeks class action status on behalf of all persons or entities that engaged in U.S.-based transactions of WTI-based derivatives during the period from January 1, 2021, to the present. The requested relief includes treble damages, injunctive relief, attorney fees, and other remedies.

The Case is No. 1:25-cv-00447-MLG-LF.

Attorneys: Matthew M. Beck (Peifer, Hanson, Mullins & Baker, P.A.) for 3Red Partners LLC.

Companies: 3Red Partners LLC; Permian Resources Corp.

News: Antitrust NewMexicoNews