U.S. oil firms are increasing their capital investment.
U.S. oil firms are increasing their capital investment.

The maxim at the center of nearly all business and financial operations should be a familiar one, whether you are a Wall Street guru or an ordinary homeowner: Buy low, sell high. According to new data on capital expenditures from major U.S. oil firms, this basic strategy seems to be working just as well as ever.

According to a report released April 3 by the U.S. Energy Information Administration, U.S. oil producers increased their capital investments by a cumulative $4.8 billion in the fourth quarter of 2016. That represented a 72 percent increase over the same period in 2015, and the first year-over-year rise at all in the same timeframe. The EIA found that among just 44 companies, there had been no larger increase in capital expenditure since the first quarter of 2012.

A more tangible way of measuring investment activity among oil producers is by tracking the total number of active rigs. Here again, U.S. producers are continually ramping up drilling activity. As the spring of 2016 began a year ago, the active onshore rig count was actually on the decline, approaching just 300 rigs around May 2016. Since then, onshore rig count has steadily risen. As of April 2017, U.S. oil producers now count nearly 700 active rigs.

This growth in investment and building activity has been expertly timed to reap the most benefit in regard to oil prices and broader economic conditions, according to the EIA.

“Higher oil prices are contributing to an increase in upstream earnings for U.S. producers, prompting some companies to increase their investment budgets,” the EIA report explained. “Company announcements and increases in the number of active oil rigs suggest U.S. oil production companies are continuing investment growth in the first quarter of 2017.”

International developments continue oil price rally

As American drillers ramp up their activity, global events and the overall behavior of the market have continually favored them. Bloomberg reported April 10 that major crude oil price indices were on track to record their longest growth streak of 2017 with news that OPEC and Russia may continue to scale back oil production efforts. With the world’s largest oil conglomerate already working to curb its total output in order to boost prices, this signal made oil traders increasingly confident that prices would continue their upward trajectory. In the previous week, crude oil prices shot up further in response to a U.S. missile strike in Syria, which could disrupt supply lines in and out of neighboring Iraq and Saudi Arabia.

The net result from all of this was reflected in the price of West Texas Intermediate crude contracts, which rose above $52 per barrel at the outset of Monday morning trading April 10. In London, Brent crude futures for June delivery rose 1.1 percent to close at $55.82 per barrel, according to Bloomberg.

Even better for companies that extract, refine and sell oil and related products, the peak summer season lies just around the corner. Bloomberg reported that hedge fund money managers were increasingly betting big on U.S. gasoline sales, for instance, with net-long positions on gasoline futures contracts rising 59 percent April 9. This means that, in the opinion of Wall Street, Americans will continue to drive up demand for gas this summer, creating a windfall for anyone on the sell-side of the arrangement. Unfortunately for consumers, this will likely translate into higher prices at the pump, assuming investor’s predictions come true.