(Bloomberg) -- U.S. shale oil production is set to rise next year following the rally in prices since OPEC’s Nov. 30 meeting in Vienna, according to the International Energy Agency, which had predicted a decline in its previous report.
“U.S. LTO is expected to continue to decline through the end of the year before rising marginally over 2017,” the IEA said, referring to light tight oil, a synonym for shale oil. In November, the agency forecast shale-oil output would decline by about 200,000 barrels a day next year, following a half a million barrel-a-day decline in 2016.
With the rally in oil prices following OPEC’s deal with other producers including Russia to slash output from January by almost 1.8 million barrels a day, “activity in the U.S. shale patch is expected to increase in the coming months,” the IEA said. The agency notes that in third-quarter results, some U.S. shale oil producers had already signaled plans to increase spending this year and next.
The IEA also highlighted the rise in the rig count, particularly in the Permian basin. The number of rigs drilling for oil reached 498 as of Dec. 9, the most since January, according to data from Baker Hughes Inc.
“After more than two years of very difficult times, the U.S. shale business model seems on a much more sustainable path,” it said. “Nonetheless, it remains to be seen whether companies can remain cash flow positive when the industry scales up activity and capital spending and as upward pressure on costs once again takes hold.”