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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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Oil Industry Boosts Spending… But There’s A Catch

Oil prices have seesawed over the past few years, still far below the pre-2014 highs, but upstream spending is expected to continue to rise in the years ahead, according to a new report from Morgan Stanley.

“Global upstream capex — more muted growth, but still a positive trajectory from here,” the investment bank wrote in a note to clients. Spending should rise by 6 percent CAGR through 2022, Morgan Stanley said, which is down from its prior estimate of 8 percent, largely because of the recent downturn in oil prices.

Between 2019 and 2022, global upstream spending rises from $461 billion to $554 billion. That comes after several years in which spending hovered at around $450 billion. It should be noted, however, that spending will not reach the 2014 peak of well over $700 billion for the foreseeable future, if ever.

Crucially, there is an “inflection point” where oil spending rises and falls. Morgan Stanley says that oil needs to trade above $50 per barrel for WTI and $60 per barrel for Brent for the industry to steadily ratchet up spending. Anything below that level and the expected spending increases go out the window.

In fact, the investment bank says that the oil industry would see a 20 percent decrease in cash flow if Brent averaged $50 rather than $60. Global spending would contract by $100 billion if oil prices…





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