-- US shale producers could step up drilling activity in response to elevated oil prices and supply disruption risks, though a US-Iran ceasefire and geopolitical uncertainty may delay near-term decisions, Rystad Energy strategists said in a note Thursday.
Rystad analysts said early signs of increased exploration and production activity are emerging as some operators prepare to lock in rigs and services before oilfield inflation accelerates.
However, the consultancy said that geopolitical uncertainty remains the dominant constraint on capital allocation, with many producers still in "wait and see" mode following the announcement of the US-Iran ceasefire.
"Recent days have seen the first public indications that US oil exploration and production companies intend to add activity in response to higher prices," Jai Singh, head of North America Oil and Gas Research at Rystad, said.
Singh said that if the momentum behind adding activity becomes clear, the 'wait and see' logic could quickly turn into 'don't miss the boat' on service costs.
Rystad warned that for a typical Permian Basin well, a 10% rise in drilling and completion costs could lift breakeven prices by about $3.57 per barrel and reduce internal rates of return by about 40% over a well's lifetime compared with wells drilled before cost escalation.
The consultancy said that US producers had maintained capital discipline during the recent spike in crude prices, triggered by geopolitical tensions, before moving to a more cautious stance focused on hedging and cash generation as disruption to Middle East shipping routes intensified.
Steep backwardation in futures markets and uncertainty over the duration of supply disruption have further discouraged immediate rig additions, though some operators have begun signalling upward revisions to activity guidance.
Continental Resources has become the first US independent to publicly outline plans to increase activity, amid plans to raise CAPEX by 15% to 20% in 2026.
Rystad projected that other private operators are likely to follow, with potential confirmation from public companies during the Q1 earnings season.
The consultancy estimates the current price environment could support the addition of 30 to 40 rigs and 8 to 12 hydraulic fracturing fleets by year-end. However, supply chain constraints may limit deployment speed.
Meanwhile, Rystad said a sustained $85-$90 per barrel West Texas Intermediate environment could drive oilfield service inflation of 18% to 25% in key categories, including frac services, oil country tubular goods, and fuel, echoing conditions seen in 2021.
Singh said once companies begin adding rigs and crews, cost inflation could accelerate quickly, rewarding early movers.
Rystad said continued geopolitical risk premiums and structural supply uncertainty could keep oil prices elevated into 2027 and 2028, sustaining a supportive backdrop for growth in US shale activity.