Famed American shale driller Harold Hamm believes the Organization of Petroleum Exporting Countries (OPEC) will surely extend an output reduction deal that has caused prices to jump upwards since it began implementation in January.
"Well, there's been some downward pressure" on barrel prices, with traders "wondering whether or not OPEC would keep the cuts in place. But I think it's a foregone conclusion those cuts will remain in place," the chairman and CEO oil explorer Continental Resources told CNBC's "Power Lunch" on Tuesday.
The OPEC agreement cuts production by 1.2 million barrels until June 2017, but the bloc is expected to meet in Vienna on May 23rd to agree on a six-month extension. Eleven other countries that are not a part of the group promised cuts of an additional 600,000 bpd.
Oil prices have been trending downwards this week as Libya and Nigeria – both OPEC members that were exempt from the deal due to domestic strife – report increasing production. The United States’ shale game has also reached new heights. Overall, the output increases are offsetting the progress in oil price healing made by the original deal.
Hamm said that for the deal to continue to be effective, it must be extended. The summer season should cause international demand for fuel to spike upwards due to cooling and transportation needs.
"We're about two weeks from school being out, people on vacation. We'll see those [inventories] come down," he said.
In a related comment, Hamm supported President Donald Trump’s remark on Monday that suggested a higher federal gasoline tax in order to fund national infrastructure improvements.
"If that's what it takes, that's what it takes,” the oilman, who advised Trump during his 2016 presidential campaign, said.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…