Energy & Environment

Texas Oil Drilling Could Soften Impact Of OPEC Cuts

While other countries seek to limit oil output, this U.S. is on track to reach record-high production.

Drilling rig at site near Denton, Texas

Oil prices hit a two-year high the Friday after Thanksgiving, but that’s not necessarily a sign of things to come.

A new agreement aimed at boosting global oil prices is expected this week, but drilling in Texas could work against the deal and keep prices low.

At a meeting on Thursday, the Organization of the Petroleum Exporting Countries is expected to extend a deal to cut oil production, an agreement meant to ease the world’s oil supply glut and help raise prices.

That may be the result in the short-term, but the story could be different over the long-term, according to oil analyst Jacques Rousseau with ClearView Energy Partners.

“We don’t think that’s necessarily what’s going to happen because of the fact that U.S. producers are adding a lot of oil,” Rousseau said.

New technology is helping Texas drillers lead the way to an expected record-high production level next year, something Devon Energy CEO Dave Hager recently talked about on Bloomberg TV.

“If you go back to 2012 and compare it to current, we are getting 450% of the amount of production out of the same type wells as we did in 2012,” Hager said.

According to Rousseau, the U.S. will soon be a bigger factor in the global oil equation.

“Things are going to get a lot more difficult in 2018 for OPEC to maintain this balanced oil market,” he said.

That means a more mild effect from the OPEC cuts than perhaps some are hoping for.

Share