Publicly traded U.S. shale firms are not budging on production restraint vows as oil markets surge amid Russia's invasion of Ukraine, leaving smaller producers to lead output gains during the highest prices in seven years.
Oil futures on Tuesday traded up as much as 10% to $107 per barrel, the most since July 2014, as Moscow's attacks on Ukraine intensified and new transport and supply disruptions emerged.
The turmoil could spark shale producers to expand already rising output by up to 300,000 barrels per day (bpd), to between 1.2 million bpd and 1.3 million bpd, according to analysts at consultancy Rystad Energy.
U.S. shale production is set to rise 109,000 bpd this month to 8.7 million bpd, according to U.S. government forecasts. In the largest U.S. production basin output will hit a record 5.2 million bpd.
Some public producers "already have significant activity momentum and they are ready to go" for more if investors back expanded shale production, said Artem Abramov, Rystad's head of shale research.
But most publicly traded companies this week remained silent on output in response to the latest price surge. Many have vowed to hold production flat or grow marginally with higher prices padding shareholder returns.
Demand for more oil could spur more shale companies to shift from a value to growth mentality, said Dan Pickering, chief investment officer at financial services firm Pickering Energy Partners.
"Domestic barrels are going to be the most important, he said. "I expect an increasing call from Washington DC for more domestic production," he added.
"This will be a slow adjustment - during 2022 and into 2023 - but it is coming," said Pickering. "We'll look back and see the Russia-Ukraine situation as the catalyst."
Among the big U.S. shale producers, EOG Resources, Pioneer Natural Resources, Chesapeake Energy, Continental Resources and Civitas Resources did not respond to requests for comment. Top U.S. shale producer ConocoPhillips referred questions to trade groups.
Smaller, privately held firms that have raised production in response to higher oil prices are going full steam ahead, some said.
Tall City Exploration, a privately-backed Permian producer, added a second drilling rig late last year and will run it through year-end. It ended 2021 producing around 6,400 barrels of oil equivalent per day (boepd) and is eying a three-fold increase to some 20,000 boepd by December.
The decision to boost production stemmed from prices rising before Russia invaded Ukraine, said Chief Executive Mike Oestmann. Russia calls its actions in Ukraine a "special operation."
Smaller producers may want to ramp production, but they may struggle "to get rigs and supplies necessary to drill and complete wells," said Bradley Williams, CEO of Dallas-based Elephant Oil & Gas.