Despite rising oil prices, the U.S. shale industry remains cautious, refraining from increasing production due to various economic and political challenges.
Start Trading CFDs Over 2,200 Different InstrumentsStart Trading CFDs Over 2,200 Different Instruments17 hours4 daysContrary to expectations, the U.S. shale industry hasn't ramped up production despite West Texas Intermediate trading above $90 per barrel.
West Texas Intermediate has been trading above $90 per barrel for a week now, and few analysts expect it to reverse course anytime soon, especially as OPEC+ is this week seen maintaining its production caps. At the same time,"Investors still do not want oil and gas exposure despite healthy risk-adjusted returns. I don't think they are coming back. It's different this time," according to a respondent to the Dallas Fed's
On top of these challenges, cost inflation remains a problem, too, despite some easing earlier this year. Inventory is also a problem, as noted earlier in the year by industry executives, as the best drilling locations get depleted. In such a situation, it would have been nothing short of a miracle—or a not very bright decision—to boost production just because prices are higher. Since this is not a fairytale, there will be no miracles. What there will be is higher prices for longer. In the absence of additional supply, price regulation will come down to demand, and demand for oil is notoriously inelastic, which means it will take a while.
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