Oil executives tempted by the prospect of the highest crude prices in seven years are showing all the signs of abandoning pledges to hold the line on drilling budgets, Citigroup Inc. said.
U.S. shale explorers are poised to boost spending by almost 40 per cent this year, based on comments and plans revealed during recent earnings presentations, Citi analyst Scott Gruber wrote in a note to investors on Monday. That’s up from the bank’s previous call for a 30 per cent rise. Overseas budgets are seen jumping by 32 per cent from the old forecast of 17 per cent.
“E&P managements will be hard pressed to abandon their commitments,” Gruber wrote. “But we foresee an increasing number beginning to lean into the market as the challenge of managing supply in a market as disaggregated as the global oil market becomes increasingly clear.”
U.S. companies probably will lift domestic daily crude production by as much as 1 million barrels this year, according to various analysts. American oil prices have climbed 21 per cent this year to more than $90 a barrel, extending last year’s 55 per cent advance.
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