OPEC ‘bullish’ on 2018 prices

The world’s major oil producers on Thursday agreed to keep a lid on production for another year as they attempt to deplete bloated stockpiles in the face of rising output from U.S. rivals.

The decision by OPEC, led by Saudi Arabia, and more than two dozen other countries, including Russia, to extend a supply cut of 1.8 million barrels a day was a long-anticipated move that sent oil prices up only slightly on Thursday after weeks of gains.

If U.S. oil prices remain near $60 a barrel, another wave of drilling in West Texas and Oklahoma could bring an economic boost next year to Houston, the epicenter of the U.S. oil industry.

“That will bring more U.S. producers back into the money,” said Ed Hirs, an energy economist at the University of Houston. “Hous-

ton’s economy will be level or better.”

Analysts have warned a drilling surge in the U.S. could offset efforts to curb global supply by the Organization of the Petroleum Exporting Countries. But the group’s officials sounded optimistic Thursday, saying that the growth of U.S. shale output has been manageable so far this year, because after years of underinvestment, oil basins around the world are in decline, and global demand continues to rise at a brisk pace of 1.4 million barrels a day.

“We don’t believe shale can nearly carry that load,” Khalid al-Falih, Saudi Arabia’s energy minister, said Thursday at a gathering of OPEC and non-OPEC nations in Vienna.

U.S. oil prices reached their highest level in more than two years last week, climbing near $59 a barrel, but have since edged lower. They settled at $57.40 a barrel on Thursday. If oil prices stay in a $60-a-barrel range, Houston could add nearly 70,000 jobs next year, according to an economic forecast by Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston.

The agreement reached in Vienna marks the second time that OPEC has extended the production cuts since adopting them a year ago. Progress in draining the worldwide petroleum glut that spurred the recent oil bust has come slowly, but OPEC has succeeded in whittling global stockpiles by about two-thirds. Prices also have responded slowly, up about $10 a barrel over the past year.

For the first time, two key OPEC producers — Libya and Nigeria — agreed to join the coalition in capping production at current levels, after lifting output this year. The two countries were previously exempt from OPEC’s cuts as they recovered from internal conflicts that suppressed output.

In addition, six more countries lined up to endorse OPEC’s agreement this week, bringing the number of countries that back the agreement to 30.

Al-Falih said oil inventories in developed nations will have to drop by at least another 150 million barrels before supply and demand come into balance across global markets.

Meanwhile, U.S. oil production continues to rise. The Energy Department said the nation’s oil output climbed by nearly 300,000 barrels a day in September, up 3.2 percent to 9.48 million barrels a day. Drillers in Texas, rebounding from the crippling effects of Hurricane Harvey, boosted output in September to 3.57 million barrels a day, up 5.7 percent.

In the third quarter, major U.S. oil companies locked in higher prices through long-term contracts for more than twice the number of barrels they did in the previous three months — meaning they will almost certainly pump more oil next year, according to a recent study by energy research firm Wood Mackenzie.

OPEC said it will continue to monitor the oil market but does not expect the anticipated increase in U.S. shale production to throw off the rebalancing of the oil market.

Al-Falih said shale oil fields cannot pump enough oil to replace the production lost to natural declines in older fields around the world.

“The 2018 outlook is very bullish, if I can use that word,” al-Falih said.