Drilling curbs by oil producers in the largest U.S. shale field will continue until transport bottlenecks ease and investors stop punishing companies for increased capital spending, executives at an energy conference said Feb. 14.

The price of crude in the Permian Basin of West Texas and New Mexico fell sharply last year, selling as much as $18 below U.S. benchmark prices, as a lack of pipeline capacity landlocked some oil output and as investors pushed producers to reduce spending and boost shareholder returns.

On Feb. 14, the regional price of crude was at a $1.10 a barrel premium to U.S. crude futures, the strongest in more than a year as companies including Parsley Energy Inc. (NYSE: PE), Pioneer Natural Resources Co. (NYSE: PXD), Goodrich Petroleum Corp. (AMEX: GDP) have pared their exploration budgets, easing the constraints.

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Pioneer Natural Resources, one of the Permian Basin's largest producers, said this week it plans to reduce 2019 capex by 11%, or about $350 million, slowing its production growth from prior years.

"There aren't nearly as many drilling dollars available," said Bobby Whiteside, president of Midland, Texas-based oil producer Regions Permian LLC. "If Wall Street wants you to drill within cash flow, you're going to have slower growth."

The Permian Basin is the nation's largest and fastest growing oil field. Its output has driven U.S. crude production to near 12 million barrels per day, forcing OPEC and allies to cut their output.

Oil and gas officials interviewed at the Houston conference say the recent shale cutbacks will remain until three proposed pipelines from West Texas to the U.S. Gulf Coast come online over the next 18 months.

Executives said the recent strengthening of regional crude prices suggest that producers can expect oil sold at Midland, Texas, to slip from the current premium to a $1 to $3 per barrel discount to U.S. benchmark crude in the second quarter.

"I don't think you'll see a big differential again unless they grow production overcapacity," said Jacob Daniels, an employee of Texas oil producer Chisholm Energy Holdings LLC, which drills in the Permian Basin.

"We're about at breakeven now, and that has really helped us," added Brett Bracken, an exploration manager at Permian oil producer Ares Energy Ltd.

The U.S. oil industry could easily meet the U.S. Energy Information Administration's oil-production forecasts over the next two years if Wall Street still rewarded production growth over returns, said Allen Gilmer, founder of market intelligence provider DrillingInfo.

"But with investors insisting on free cash flow and dividends, maybe we won't," Gilmer said. "These guys have amazing assets but their stock prices haven't benefited at all from growing reserves or production."