U.S. oil field spending is poised to climb
Oil companies expect to spend billions more next year on drilling wells and pumping oil across the United States, a financial boom for firms in Houston.
Oil companies expect to spend billions more next year on drilling wells and pumping oil across the United States, a financial boost for firms that sell tools and equipment, farm out crews for rigs and fracking fleets and employ thousands in Houston.
A survey released Wednesday of more than 300 oil companies indicates the industry plans to boost U.S. oil field spending — the lifeblood of local oil field services companies — by 15 percent in 2018 to more than $100 billion.
If oil prices stay high enough to support those investments next year, it would mark the second year in a row in which U.S. drillers led a global spending hike as crude prices recover from the market’s collapse in 2014. Companies lifted U.S. spending 49 percent in 2017, according to the survey by New York investment bank Evercore ISI.
“The pace of overall North American spending through the recovery will moderate in 2018 as companies look to live within cash flow,” James West, an analyst at Evercore, said during a conference call with investors. “But 2018 could be the first in several years that commodity prices surprise to the upside.”
All told, companies that produce oil and gas will spend $385.5 billion around the world, up $24.8 billion, or 7 percent, over 2017. More than half of that increase — $13.3 billion — will be spent in the U.S. Still, global spending will come in about 50 percent below the industry’s 2014 peak.
Over time, those investments will put more drilling rigs to work next year. This month, Evercore said, oil companies could take out some 5,000 U.S. onshore drilling permits, the biggest monthly haul of the year, as domestic oil prices rise vault above $55 a barrel. State agencies issued 2,460 drilling permits this month through Dec. 8.
On Tuesday, the Energy
Department said it expects U.S. oil prices to average $57 a barrel next year, about $2 per barrel higher than its forecast last month. And it now expects domestic crude production to reach 10 million barrels a day by the middle of 2018, rather than by the end of the year, as it predicted before the recent rally in crude prices. U.S. oil prices slipped 54 cents Wednesday to settle at $56.60 a barrel in New York.
In its monthly forecast, the Energy Information Administration said it expects U.S. oil output to rise an average 800,000 barrels a day next year, while Canada, Brazil, Norway and others add another 700,000 barrels a day. It also expects OPEC to lift production by 200,000 barrels a day.
Meanwhile, oil demand could rise 14 percent to 1.6 million barrels a day next year. But that demand growth, as strong as it is, the EIA said, is not going to be able to keep up with rising supplies, increasing global liquid fuel inventories by an average of 50,000 barrels a day next year. Still, that is a downward revision from its forecast that oil stockpiles would grow by 290,000 barrels a day next year.
That’s in part because the Organization of the Petroleum Exporting Countries’ efforts to curb the global oil glut over the past year appear to be paying off, as worldwide oil inventories decline.
Last month, just before OPEC met in Vienna to extend its oil production cuts through the end of next year, the group’s output fell to the lowest level since this summer, according to secondary sources cited in the cartel’s monthly oil market report on Wednesday.
The 14 member nations of OPEC pumped 32.4 million barrels a day in November, down by 133,500 barrels a day compared with October and down 273,000 barrels a day compared with September.