|Will US shale oil operators forget capital discipline and produce a lot more oil next year as oil prices reach a seven-year high?|
As demand has recovered, resulting in higher and sustained oil prices, Capex has also increased but significantly less than in previous years. This year, despite a 70% increase in oil prices operators are only increasing Capex by 9% and are expected to have a similar increase next year. Average oil prices in 2021 are higher than in 2018 but Capex is only 65% of what was spent in 2018. The main reason is capital discipline, which is suppressing activity despite high oil prices. Another factor is the well efficiencies achieved by operators since 2018. Despite high oil prices, rigs are 22% below pre-Covid-19 levels and frack crews 10% below.