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What Friday’s OPEC Meeting Could Mean For Texas

Texas drillers are dealing with other headaches that could complicate the OPEC effect

A pump jack in the Permian Basin in 2013

The Organization of the Petroleum Exporting Countries is set to considering allowing its members to increase their oil production at a meeting Friday in Vienna, Austria, a decision that could have implications for Houston-based oil companies and prices at the gas pump.

The oil cartel’s member nations have purposefully cut production since late 2016, in an effort to help stabilize global oil prices. Now, with that job largely accomplished, Saudi Arabia and Russia are reportedly pressuring OPEC members to open up the floodgates again.

The cartel has also faced pressure from President Donald Trump, who railed against “too high” oil prices on Twitter this month, seemingly blaming the OPEC cuts.

Wood Mackenzie oil analyst Ann-Louise Hittle said the outcome of the meeting is still “highly uncertain,” but there are three distinct possibilities:

  • OPEC could maintain its current oil cuts agreement, which would still lead to weaker oil prices closer to 2019, as U.S. production continues growing.
  • The organization, along with Russia, could agree to “moderate” combined oil increases of less than 1 million barrels/day in 2019, which would keep Brent crude prices hovering around $71/barrel through 2018.
  • The meeting could lead to a “dramatic” increase of about 1.5 million barrels/day, which would “significantly” weaken global oil prices and lead to lower gas prices in the U.S. (This would be good news for President Trump, Hittle notes.)

The firm said a moderate OPEC move is likely. Economist Karr Ingham, with the trade group Texas Alliance of Energy Producers, said that outcome wouldn’t slow down drillers here. 

“Pricing is going to be favorable for continued development in Texas and in the United States,” he said. “What it simply may do is slow the rate of that development just a touch, but it’s going to continue to be production growth.”

Still, Ingham said Texas drillers are dealing with other headaches that could complicate the OPEC effect, namely the prospect of increased costs from President Trump’s steel tariffs.

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