What happened

Crude oil continued its steady sell-off today, closing down 2% to around $42.50 per barrel, which marked its lowest level in 10 months. That's despite some positive data from the U.S. Energy Information Administration (EIA) that showed crude oil inventories falling by 2.5 million barrels, which was a deeper draw than the 2.1 million-barrel decline analysts expected. While that was an improvement from recent data, it just wasn't good enough for the oil market.

That's because the EIA also noted that output from shale drillers continues to outpace expectations. This past week, for example, the EIA revised its production estimate upward by 20,000 barrels per day because shale drillers are producing at higher rates than anticipated. Given that crude inventories remain at the upper end of the range for this time of year, the market doesn't need this production, which is pushing down oil prices.

Land rig drilling at sunset.

Image source: Getty Images.

So what

Whiting Petroleum (NYSE:WLL) is one of the many culprits driving U.S. oil output higher. During the first quarter, the company blasted past expectations thanks to some monster well results in the Bakken Shale. Overall, the company produced 117,360 barrels of oil equivalent per day (BOE/d), which was at the high end of its guidance range, leading it to boost its 2017 production outlook. That forecast has it on pace to increase output 23% by the end of the year, which it can do within cash flow as long as oil averages $55 per barrel. However, given where crude is right now, Whiting is at risk of outspending cash flow as it chases this growth, which is why the stock sold off today, falling as much as 10% by mid-afternoon.

Sanchez Energy (NYSE: SN), likewise, fell by double digits today because of its overly ambitious growth projections. Earlier this year, the company joined forces with a private-equity fund to acquire a large land position in the Eagle Ford Shale for $2.3 billion. It's a transaction that the company expects will help fuel 20% compound annual production growth over the next three years, enabling it to reduce leverage to a slightly more comfortable 3.0 by the end of next year. That said, Sanchez Energy needs crude to average $55 a barrel to make its plan work, which is growing increasingly unlikely since its rising output is part of the problem.

Carrizo Oil & Gas (NASDAQ:CRZO) is almost a carbon copy of Sanchez, in that while its leverage is an elevated 3.3 at the moment, the company anticipates that the level will drop as it increases output. Overall, Carrizo expects to grow oil production 26% this year, and 20% compounded annually over the next three years. However, with crude prices continuing to fall because of increased output from shale, Carrizo Oil & Gas might not have any choice but to slow down its drilling activities so it doesn't drill itself any further into debt. Those fears sent its stock spiraling lower today.

Another shale driller that has contributed to the oversupply problems in the U.S. is Bill Barrett (NYSE:HPR). The company has gotten off to a fast start this year, with production volumes coming in at the high end of its guidance range. Further, Bill Barrett recently added another drilling rig to its operations, which positions the company to accelerate growth heading into 2018. However, that decision to ramp up has come back to bite Bill Barrett, given the continued sell-off in crude prices, which drove its stock down more than 12% at one point today.

Gastar Exploration (NYSEMKT: GST) also got hammered today, as part of the market's backlash for its decision to boost drilling activities this year. Like many other shale drillers, the company's production outpaced expectations during the first quarter, with Gastar Exploration reporting that output blew past the high end of its guidance by 6%. That said, given the company's tight financial situation, it needs to take its foot off the gas and slow its drilling activities now that crude prices are slumping, so it doesn't continue adding supplies the market doesn't need.

Now what

Shale drillers have unleashed a torrent of new crude supplies this year, partially because new wells are outperforming expectations. Normally, this would be good news. However, because the market doesn't need this oil, it's pushing crude prices lower to send a message to shale drillers to slow down. The question is whether they will listen and curb spending, which might just be the cure to stop the slide in crude oil and their stock prices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.