Shale 2022 Analyst Perspective: US Tight Oil’s Uncharacteristic Response to Rising Prices

The run-up in oil price is an important test for the U.S. shale sector, and so far, it’s passing with flying colors. But what are the macro trends shaping the near-term trajectory of U.S. tight oil?

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Many doubted tight oil’s ability to show restraint. But after a hard reset in 2020, the sector continues to resist the temptation to grow, even with oil prices above $80/bbl. A look back at history shows how unique this moment is—never before has tight oil investment been so low with prices so high.

So what are the macro trends shaping the near-term trajectory of U.S. tight oil?

Several issues are worth noting. First, year-to-date, there has been no meaningful supply response to rising prices, and Wood Mackenzie does not expect to see material growth until 2022. Additionally, the rig recovery is sluggish compared to the previous downturn and uneven across the major oil plays.

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