Did you notice? In early May the price of WTI crude oil surpassed $70 per barrel for the first time since November 2014. While the mainstream media picked up on the momentous occasion, industry analysts seemed too caught up in the waning days of earnings season to pay much mind to the accelerating momentum of oil.

For Pete’s sake, oil’s at $70. Finally. This is extraordinary news, right?

Harken back to a year ago when WTI lingered in the $40s, trying desperately to cross that all-important $50 mark, a seemingly minimum price floor to awaken the industry from its self-induced coma it had placed itself in during the dark days of the prolonged downturn. The sentiment was that $60 again would be really great, but Lord, we can make a living at $55. Just promise us $55.

Many a producer hedged their bets somewhere around $53, locking in guaranteed cash flow. Today they might long for the upside, but a year ago producers believed a return to $40 was more likely than a return to $70.

WTI is up 18% year-to-date, and nearly 30% in the last six months.

You can thank OPEC and Russia. For all the talk over the past years that the contingent of oil exporting countries was irrelevant in the modern world, that prognosis has been proved wrong. The deal struck with Russia in the midst of a massive global supply glut (yes, exacerbated by OPEC itself) to curtail production ultimately did what it was supposed to do—bring global inventories back down to normal levels.

Now, a year and a half into the supply rebalancing act and with the cushion of static barrels sucked up, the price of crude once again is influenced by geopolitics. The political implosion in Venezuela has taken 1 million barrels per day (MMbbl/d) off the global scene, and the mere announcement that the U.S. will re-impose sanctions on Iran already has traders worried about the fungibility of those 3.8 MMbbl/d. It was the latter news that sent the price north of $70 in May.

All is well in our world and we can get back to the business of making economic barrels, you would think.

But, oh, the domestic industry is facing a conundrum.

Many public equity investors exited the sector, seeking stable returns in less volatile industries. To woo them back, large- and mid-cap public companies have promised production discipline and a focus on producing cash flow instead, which will of course be driven into shareholder rewards. That was a great mantra at $60 oil, but with the cash flowing at $70, will producers break rank and drill ahead?

Not so far. Through first-quarter earnings, large cap E&Ps stuck to their pinky swears, holding firm to promises of measured growth with rewards for investors. When asked during its conference call if the company would increase activity with rising prices, Anadarko Petroleum Corp. CEO Al Walker reiterated a firm no.

“Philosophically, our views as a company are no different than the comments we expressed in January related to this, where we talked about the fact that on the margin beyond capex, we felt like the best use of our cash was to buy back stock, increase dividends and to retire debt as we shrink the balance sheet.”

Similarly, an analyst asked EOG Resources Inc. executive vice president of E&P Billy Helms if the company might, just might, take a smidgeon of the anticipated $1.5 billion in excess cash flow through 2018 and put it back into the drillbit. Helms was resolute: “We remain committed to stay within our capital guidance. … We don’t anticipate increasing activity.”

Simmons & Co. analyst John Daniel, however, noted a 5% increase in projected rig count among a select group of Permian players he interviewed, and extrapolated a 31% increase in activity over the next year for all Permian players. It’s likely the smaller publics and the host of private operators in the Permian and elsewhere are hungry to getting back to growing. The U.S. onshore rig count has crossed the 1,000 threshold and is rising.

Bank of America was the first to suggest that oil (Brent in this case) could once again see $100/bbl in 2019, according to a Bloomberg report. The Nymex five-year forward curve is not so optimistic, with the WTI futures contract trading in the low $50s.

Which will it be? Which do we want? Be honest—would you actually feel some trepidation if oil were to return to $100? For now, $70 feels right. The industry is in a good place.

If you’re an Appalachian producer or have money at play there, you’ll want to join the Oil and Gas Investor team for the DUG East conference June 19-21 in Pittsburgh. Find out how upstream producers and midstream operators are “gassing up” for growth on 2018 and beyond.

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