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Texas Claims Victory As OPEC Forced To Roll Over Oil Production Cuts

Oil

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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  • Orchard on May 25 2017 said:
    Conventional oil fields deplete by 4-6% per year. Most of the OPEC nations are hemorrhaging billions in this depressed environment, and are cutting back on required maintenance in favor of keeping the populations from starting Arab Spring 2.0.

    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.
  • zorro6204 on May 25 2017 said:
    Kind of reminds me of that Gahan Wilson cartoon of the soldier standing in the middle of total destruction, mangled bodies and shattered buildings, and the caption is, "I think I won!"
  • Thomas on May 25 2017 said:
    Just for once, rather than print a story on what other people say, why don't you do some investigative journalism and highlight how quickly American shale oil fields deplete in the course of just 1 year of operation and how ever more drilling rigs are required on those fields just to keep crude flowing at the same rate.
    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?
  • david on May 25 2017 said:
    Whoo Hoo! Good for Texas, as it appears the Permian is the only basin in the US that is producing. Also, showing OPEC how, we too, can drive down prices well below breakeven and eventually out of business.

    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!

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