The governor of shale-rich Oklahoma welcomes news that members of OPEC have agreed to limit their crude oil production. (UPI/Shutterstock/Lilac Mountain)
OKLAHOMA CITY, Dec. 2 (UPI) -- The shale oil and natural gas sector in Oklahoma is on better footing now that OPEC has agreed to cut its production, the state's governor said.
Oklahoma is one of the most significant producers of crude oil in the United States, accounting for about 4 percent of the nation's total. It hosts some of the largest deposits of shale oil in the country and the trading hub in Cushing is considered the most significant entity of its kind in North America.
Shale states like Oklahoma have faced economic hardships in part because the low price of oil made it expensive to work in the cost-intensive basins in the state. Gov. Mary Fallin said the decision by members of the Organization of Petroleum Exporting Countries to limit production was welcome news for her state.
"Our oil and gas producers and the thousands of Americans they employ have done a great job of persevering during difficult times," she said in a statement. "Thanks to their hard work, innovations and efficiencies, America is better positioned to compete and win in the world energy market."
The price for West Texas Intermediate crude oil, the U.S. benchmark based on the oil stored at the Cushing oil terminal in Oklahoma, is up more than 7 percent from the start of the week on the back of OPEC's announcement.
OPEC set a target production of 32.5 million barrels per day "in order to accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward."
A surge in crude production from U.S. shale, Russia and a post-sanctions Iran helped push markets heavily toward the supply side, sending oil prices crashing below the $30 mark in early 2016. WTI started trading Friday below its high point for the year, however.
WTI closed at $51.59 per barrel on Oct. 18, five days after Oklahoma's governor called for a state day of prayer for the oil sector. Fallin said the government recognized oil and gas companies have made significant contributions to the economy, as well as having a "faith-based impact."
Analysts said the OPEC agreement is designed more to correct the supply-side pressures building in the oil market than about stimulating crude oil prices. If prices move too high, producers will rush into shale-rich states like Oklahoma and potentially tilt the market scales back toward the supply side and erase the recent trends in crude oil prices.
Oklahoma reported tax collections from oil and natural gas production in October at $35.1 million, an 8.9 percent increase from the same month last year. The improvement marks a first for the shale-rich state in almost two years.
"It's not yet time to sing 'Happy Days Are Here Again,' but this month's gross production number is welcome news," State Treasurer Ken Miller said in a statement.