"Texas shale producers forced OPEC this morning to extend its oil production cuts for 9 months," Texas Railroad Commissioner Ryan Sitton said on Twitter on Thursday, shortly after OPEC agreed to extend the oil production cuts for nine months until March 2018.
On Wednesday, Sitton said that "OPEC meets tomorrow and is expected to cut oil production again thanks to the resiliency of Texas shale drillers."
"Less OPEC oil on the market enhances the opportunity for American energy to fill needs around the world, and will help us achieve energy dominance," Sitton also said, as quoted by Reuters.
"The days of OPEC using oil supplies and prices as a political weapon are gone," the commissioner at the Texas oil regulator went on to add.
OPEC decided to continue with the current level of cuts, sending oil prices lower, as that particular outcome of the OPEC meeting was expected and already priced into the oil market. In addition, investors who had expected deeper cuts or a longer period of extension came away disappointed.
It was OPEC's initial output cut announced in November that lifted oil prices to a more stable around-$50 level, instilling new confidence into U.S. shale drillers that have been increasing production since. Most of the output growth has been coming and is expected to come from the Permian in West Texas, which is set to account for more than half of the 122,000-bpd production growth in the main shale plays in June, according to the EIA.
Related: Saudi Arabia Signs $50 Billion Worth Of Oil Deals With The U.S.
U.S crude oil production is now expected to average 9.3 million bpd this year and almost 10.0 million bpd next year, compared to an estimated 8.9 million bpd in 2016, the EIA's latest Short-Term Energy Outlook shows.
The oil and gas industry of Texas continued to recover in April, with strong oil production growth last month, the Federal Reserve Bank of Dallas said last week. Total Texas oil and gas employment rose in March by 3,500 jobs to around 211,700 jobs, for the third consecutive month of increases in total Texas oil and gas employment, the Dallas Fed said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
This oversupply will soon flip to massive shortage in the next 24 months. Although fracking fields can be brought online in 3 months, conventional projects of significance require billions and much longer lead times.
For every new Tesla buyer there will be 10x that amount in India /China buying their first gasoline powered car.
P.S. The best leveraged play here is in the fracking sand providers.
The true winners in this market are the fracking sand firms that will see EXPONENTIAL growth in demand as their input gives the best ROI.
Only recently the editor of this website indicated the reason American shale oil has increased so dramatically is not because new wells have been drilled but because the shale companies are completing their DUC's.
What happens when there are no more DUC's to complete?
The OPEC cuts shows that the world can produce responsibly as with demand. Anyone or country can flow the market with weaker demand. Being responsible with supply helps jobs and the environment.
So Victory to the Industry around the world!