Even before the preliminary OPEC freeze agreement, Bloomberg reported that the oil industry is ready to start adding some CAPEX next year.
According to Blomberg, companies will increase spend by about 2.5% next year, and then increase spend by 7-14% in 2018. Of course, this amount is well below the average annualized compound rate we noted over the last decade and reported in this week’s article OPEC Reaches An Agreement To Freeze.. Sort of. I would note that this goes against the IEA forecast for 2017 that companies might continue to cut CAPEX and also goes against the majority of big oil forecasts reported on Q2 earnings calls (SEE our article Oil Majors Reported Earnings Last Week) in which the majority of oil companies forecast relatively flat CAPEX for 2017.
I would advise everyone to stay tune and wait for Q3 earnings conference calls to see what big oil is doing in response to the OPEC freeze. Of course, you know we will let you know once we have the transcripts summarized.
By: Ty Chapman
Five Star Metals, Inc.
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