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As U.S. Oil Production Increases, OPEC Extends Oil Cuts

“I’m sure there were a few sighs of relief,” says a Houston oil analyst.

Oil derrick
IHS Markit expects rising U.S. and Canadian oil production will be an “offsetting factor” for the OPEC cuts by the end of 2018.

OPEC – the global oil cartel – has agreed to keep cutting production, a move meant to further stabilize oil prices around the world.

The decision to extend oil cuts through March didn’t surprise people in the know. After all, there’s still a global oil glut that’s hurting prices. And the ongoing cuts have helped, stabilizing prices around $50 per barrel. That’s a place where Texas drillers can still make money.

Houston analyst R.T. Dukes with Wood Mackenzie says the OPEC decision is good news ­for companies, though not necessarily the best news ever.

“I doubt anyone popped corks on bottles of champagne with this announcement,” he says, “but I’m sure there were a few sighs of relief.”

$100 oil is still probably not anywhere in sight. But, Dukes says, the cuts and the stabilized market they’ve led to lets Texas companies be a little more relaxed about the future.

“I’m sure companies went you know, we planned for a $45-50 oil price, and this gives you a little bit more confidence that you’re going to get that in the next two and a half quarters,” he says.

What’s good news for the U.S. is still tricky for the world.

Another analyst firm, IHS Markit, says it expects production increases from the U.S. and Canada will basically cancel out the OPEC cuts by the end of 2018. Even with rising demand, that means the world will still have too much oil on its hands for a while.

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