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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

Offshore rig

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.

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 averaged $10 per barrel less.

U.S. shale is expected to continue to play a key role in driving spending levels higher, even though many shale drillers are burning through capital and are trying to convince their shareholders that they will dedicate themselves to capital discipline. Red ink continues to pile up and some even within the industry think that this problem is not going away anytime soon.

Morgan Stanley sounds more optimistic. “While investors have called for a much more restrained spending outlook,…





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