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HOUSTON – After curbing or holding up spending in the past two years, major U.S. oil companies are expected to boost capital spending in 2011, showing confidence that high oil prices are likely to stay.

Chevron Corp. Chief Executive John Watson said last week that the company's capital-expenditure program next year is likely to be higher than this year's budget, which is expected to be over $21.6 billion. Although Watson didn't provide a specific figure, Deutsche Bank analyst Paul Sankey said in a research note that the San Ramon, Calf.-based company will raise capital spending by about 11% to $24.2 billion in 2011.

That would mark the first increase in capital spending for Chevron, the second-largest U.S. oil company by market value after Exxon Mobil Corp., since the recession struck two years ago.

ConocoPhillips (COP), which has sharply cut its expenditures due to an aggressive restructuring plan to restore its finances, said in recent weeks it may increase capital spending in 2011 to between $13 billion and $14 billion from $11 billion to $12 billion this year.

Although it hasn't detailed its 2011 budget, Exxon has said recently that it will stick to a range of $25 billion to $30 billion for "next several years." But the Irving, Texas-based company is on track to spend this year slightly more than the $27.1 billion it did in 2009 and is expected to increase its 2011 budget to $30 billion, said Pavel Molchanov, an analyst at Raymond James. Part of the boost in spending comes from the company's acquisition of natural gas producer XTO Energy Inc.

"These companies will generate more cash flow in 2011 than [they] did in 2010 due to higher oil prices so it makes sense for them to increase their capital program," Molchanov said.

U.S. oil majors' spending outlook underscores a bullish view on the future of oil prices. After prices collapsed in early 2009 to below $40 a barrel from their all-time highs of over $145 a barrel in July 2008 and refining profits withered, energy companies reined in their spending on higher cost capital projects. But the steady rebound in crude prices, which were trading Tuesday at $83.48 a barrel on the New York Mercantile Exchange, seems to signal that the budding global economic recovery seen in recent quarters is here to stay, said Phil Weiss, an analyst at Argus Research. The amount of money oil companies spend to seek and develop new sources of oil and gas is expected to continue to grow for at least the next three years, according to a report released by Wood Mackenzie last week.

Conoco CEO Jim Mulva said in late October that oil prices are likely to increase to between $85 and $89 a barrel in the next two years driven by strong oil demand.

Major oil companies are planning for $70 to $80 a barrel crude as they prepare their 2011 capital budgets, says Tom Ellacott, an analyst at energy consultancy Wood MacKenzie. U.S.-based oil companies typically plan their capital expenditure budgets in the fall and formally announce them in December. Exxon unveils its capital program budget at its analyst meeting in March.

U.S. oil majors are expected to invest more in developing unconventional resources in onshore North America than they have in the past. The prolific Marcellus Shale, a natural gas-rich rock formation in Pennsylvania and New York where Chevron and Exxon have recently acquired large acreage positions, is expected to receive a large influx of capital. So are the Eagle Ford and Haynesville shales in Texas and Louisiana, where ConocoPhillips is ramping up drilling activity.

The U.S. Gulf of Mexico's deep water, a region that in past years has been a critical recipient of major oil companies' investment dollars, is expected to remain relevant. Companies, however, are likely to have conservative budgets for the area due to the expected higher operating costs likely to result from the implementation of stricter regulations after the Deepwater Horizon oil spill, Argus Research's Weiss said.