Upstream CapEx not high enough to keep up with rising oil demand

[dan_s]

Note below from Raymond James energy sector team today.
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This is our 11th annual report on global upstream capital spending: the single most important leading indicator of oilfield activity and ultimately medium-term oil supply. After an epic spending collapse in 2020, there was noticeable recovery for three consecutive years. Based on our industry survey (with all the underlying data available upon request) — encompassing public companies that account for what we estimate to be 70-80% of global spending — spending in 2023 was up 8%. Although less than originally budgeted, this finally took spending above where it had been pre-COVID. For 2024, our survey points to spending essentially plateauing, with barely a 3% uptick. This points to the fact that capital discipline is emphatically here to stay, irrespective of how high oil prices may get.

Also here to stay is the industry’s adaptation to ESG investor pressure, as exemplified by net zero targets and rising emphasis on renewable and clean tech efforts. In fact, a disproportionate share of the recent spending increases is attributable to low-carbon initiatives, which means that “traditional” (fossil fuel) spending is increasing even more slowly than you might think.