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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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U.S. Oil Executives Cautiously Optimistic About 2021

Drilling rig

The worst seems like it’s over for the U.S. oil industry. Yet executives are entering the new year with cautious optimism, the latest Dallas Fed survey of the industry suggests. Despite an improved outlook for oil and gas in the final quarter of 2020, the biggest portion of respondents in the quarterly survey said they only expected a slight increase in capital spending this year after a disastrous 2020 that saw hefty budget cuts.

The cautiously optimistic executives, however, represented a bit over a third of the total, with 14 percent expecting significant further spending reductions. Interestingly, the same percentage of respondents in the Dallas Fed survey said they expected a substantial increase in spending.

These results suggest mixed sentiment in the industry that only just started getting back on its feet, with the Energy Information Administration’s latest weekly report estimating crude oil production at 11 million bpd, down by about 2 million bpd from pre-pandemic levels.

However, that was to be expected. U.S. oil production fell for three of the four quarters of 2020 in response to oil price movements and only started rebounding in the final quarter of the year. Whether the recovery will continue or slow down remains to be seen and very much depends on how prices move from now on.

The key shale oil industry also presents a mixed picture. Some are pessimistic about its future as most producers cannot break even at current prices. Others are optimistic, and there is even a suggestion among observers that the EIA and the industry itself are deliberately being gloomier than they need to be in order to get OPEC+ to continue its production cuts to keep prices higher.

Related: Big Oil’s Renewables Push Will Come At A Cost

While these cuts have helped prices, uncertainty remains because it’s not just production that determines where the industry goes but also demand, which is arguably a much more important factor right now. And when it comes to demand, the future remains highly uncertain, as Forbes’ David Blackmon noted in a recent article.

The pandemic is still raging in the United States, vaccinations are going much slower than planned, and this means that the eagerly awaited return to normal, if it ever happens, will happen later than many hoped, including in the oil and gas industry.

As a result, the industry will likely continue to face the same challenges this year that it had to tackle in 2020. Layoffs will continue, the Dallas Fed noted in its survey, although they will slow down if prices stabilize. There could be more bankruptcies, too, after last year saw 40 exploration and production companies fold, with a combined debt of $54 billion.

If prices continue to improve, however, the outlook will change. Yet there is no consensus on prices in the industry: forecasts by Dallas Fed survey respondents vary between $30 and $70 a barrel for West Texas Intermediate. Of course, this may reflect differences in cautiousness, but it is a fact no one really knows where oil prices would go even a month from now, let alone by the end of the year.

The situation for U.S. oil companies, especially smaller independents, remains challenging. With hundreds of thousands of new Covid-19 cases daily, the return to normal is being delayed, and so is the strong recovery of oil demand in the world’s largest consumer. Yet demand is recovering in Asia, and it is recovering strongly, boosting export opportunities.


In the end, it will again be all about costs and competitiveness, just as it was during the last oil industry crisis. U.S. shale pulled it off last time, with significant help from oilfield service providers—and it ended up leading the boom in U.S. oil production that turned the country into the world’s largest producer. This year will offer the first signs of what is to come later and whether the industry would be able to recover as strongly from this crisis.

By Irina Slav for Oilprice.com

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  • John George on January 06 2021 said:
    It will rebound big time. It’s been artificially kept low, desperate and starved, reputation deliberately damaged by fake news and false climate change claims, groomed and made ripe for the foreign powers to take over with a desperate labour force ready and willing to return at all costs. Fact is oil is the future for hundreds of years to come and always will drive the world. Any fool can see what’s been happening. Clean energy is a myth but gives enormous political power to lying divisive political forces, who are thankfully on their way out as the world now wakes up and exposes the truth.

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