US oil industry analysts were hopeful but still skeptical that OPEC would be able to boost oil prices with an agreement to limit output.
After seeing the crash in oil prices force a cutback of US domestic production of more than one million barrels a day, the tentative OPEC pact could deliver some relief to US drillers.
“OPEC’s news might create a short-term price increase, but such prices would have to be sustainable for the long term in order to increase capital budgets and new projects in the US,” said Jeffrey Eshelman, senior vice president of the Independent Petroleum Association of America.
“It remains to be seen, whether OPEC’s commitment will create a long term price increase that can translate into confidence for new US projects and expenditures,” he said.
US crude oil output peaked at 9.6 million barrels a day in June 2015, according to government data.
Much of that came from shale fields tapped by the controversial new fracking techniques, though the bulk of US output still comes from traditionally tapped deposits.
As prices plunged, US production fell in parallel, declining 12.5 percent to 8.4 million barrels a day in August.
That was in part the hope of OPEC leader Saudi Arabia, which aimed to squeeze out of the market higher-cost producers, its focus primarily on the United States and Canada.
US oil companies, large and small, slashed investment spending and laid off thousands of workers, with the relatively high-cost shale drillers hit hardest.
But the crude price plunge didn’t completely savage the US shale oil and gas sector, as the industry innovated cheaper fracking techniques to cut production costs and maintain output profitably.
In addition, amid strong demand, US natural gas production has risen 11 percent in the past year, most of the added output from shale fields.
“The shale gas industry, to OPEC’s surprise, continues to be a world leader,” said Eshelman.
Economist Patrick O’Hare at consultant Briefing.com said he needed to see more concrete action.
“Talk is typically cheap without action, but on Wednesday, it bore some oil price riches for OPEC, which we would argue knew full well how the oil market would react to it simply saying it has agreed to a production cap,” he said in a client note.
“The official details will reportedly be made known at OPEC’s official meeting on November 30, which is roughly two months away and pretty much an eternity in OPEC’s world for some deal breakage, particularly given the incentive to pump more as oil prices move higher.”

Source: Arab News