Some oil basins in the United States are getting economic support in the form of an OPEC-fueled rally in crude oil prices, S&P Global Platts finds. Photo by photostock77/Shutterstock
NEW YORK, Dec. 8 (UPI) -- Some oil producers in the United States are expected to see gains as oil prices recover on the back of OPEC's output agreement, Platts reports.
The Organization of Petroleum Exporting Countries last week agreed to limit oil production to around 32.5 million barrels per day starting in January. A crude oil market favoring the supply side responded with gains in prices for the Brent and West Texas Intermediate benchmarks.
Crude oil prices had already been on the road to recovery, holding in the mid $40 per barrel range in the third quarter as some demand factors started to factor into the market. Based on a low-end estimate of $50 per barrel for WTI, S&P Global Platts said in an emailed report that some U.S. oil producers are expected to reap the rewards of the OPEC-fueled rally in oil prices.
Taylor Cavey, an analyst for Platts, said producers in the United States have learned to become resilient to the low-price area by cutting costs and making their operations more efficient.
"Producers will carry forward these newly acquired skill sets ... as oil prices are expected to improve and allow for a meaningful supply response," Cavey said.
With WTI even at its low end, Platts said it's "clear" that some U.S. shale oil producers are finding an incentive to increase their production as oil prices look for a new floor near the $50 per barrel range.
The Permian shale basin in Texas may be the greatest benefactor from improved prices. Total oil production from Permian this year should average around 2 million barrels per day. If WTI holds around $50 per barrel at least, Platts estimates production could growth by at least 75,000 bpd next year.
Elsewhere, the Denver-Juelesburg shale basin in Colorado can expect some modest improvements, though other shale areas won't be so lucky, Platts found.
A report this week from the U.S. Energy Information Administration said U.S. oil producers have been more resilient than expected during the downturn. Total U.S. oil production this year is expected at 8.9 million barrels per day, about 5 percent less than last year. EIA expects production next year at 8.8 million bpd, which is more than it forecast in its short-term market from the previous month.
EIA forecasts an average price for WTI next year at $51 per barrel.