Rising oil prices could put some joy in budget planning

Research group Wood Mackenzie thinks it’s a pretty sure bet that oil companies will increase U.S. spending by at least $10 billion next year, likely breaking a gloomy two-year stretch of deep cuts.

The question now is in response whether the oil market’s to rising optimism will hold while oil prices, drillers get into budget“it looks planning season over the next like capital few months. If oil prices keep expenditures rising, a spending increase will grow by of $20 billion or $30 billion 5 to 10 percent next year isn’t unthinkable, very easily said R.T. Dukes, an analyst at in 2017,” Dukes said. “If oil Wood Mackenzie in Houston. prices approach $60 a barrel

The firm estimates U.S. next year, that increase will energy companies spent inflate considerably.” between $40 billion and Even a small boost to oil $50 billion developing company budgets would onshore oil fields this year. As mark a major turning point drilling activity accelerates for the producers that cut spending in the U.S. by half over the past two years — a larger percentage than in the tumultuous mid-1980s oil bust. Around the world, drillers have delayed $1 trillion in exploration and production projects.

But domestic drillers are already seeing the fruits of rising oil prices, at least in the major U.S. shale plays. The steep slide in oil production across shale plays in Texas, North Dakota and elsewhere is moderating after drillers sent 116 oil rigs back into the field since May.

On Monday, the Energy Information Administration reported these shale plays put out 30,000 fewer barrels each day in November, bringing their combined output to 4.43 million barrels a day. That’s the gentlest decline since the oil production numbers began falling in May 2015. And it’s well below the average drop of 110,000 barrels a day from December to August.

Société Générale, the French financial services company, forecasts that U.S. crude production, including from fields outside shale plays, will hit bottom in the second quarter of next year.

Oil companies and their equipment suppliers, meanwhile, are waiting to see whether the Organization of the Petroleum Exporting Countries can actually seal the deal it proposed last month in Algiers. At the OPECmeeting, the Saudiled cartel signaled it would resume its role trying to manage global oil supply, a strategy change that marks a turning point for oil markets. Saudi Arabia and its Persian Gulf allies spent two years pumping oil and waiting for low prices to curb high-cost oil production in the United States and elsewhere.

Michael Wittner, an oil market analyst at Société Générale, said that reversal is likely more important than whether an OPECdeal to freeze output is made final at the end of November, OPEC’s self-imposed deadline for ironing out the details of the agreement.

“They’re trying hard to make a deal.” Wittner said. “If you’re a producer or a service company, you want it to happen.”

Domestic drillers are already seeing the fruits of rising oil prices, at least in the major U.S. shale plays.