Posted by Ryan Sitton

A couple of weeks ago OPEC’s meeting convened, as it does every six months. And as many people anticipated, OPEC agreed to continue its production cuts at one and a half million barrels a day for the next nine months. What was interesting about this was not that the cuts were made, but that in response to those cuts, oil prices actually went down. A lot of people have asked me why that happened. I have to explain that when your considering the way oil prices are set, it’s not about supply and demand today. In fact, it’s not about supply and demand in the future. It’s what a bunch of people doing oil contracts, think supply and demand will be in the future.

A lot of people were hoping and even anticipating that OPEC’s may take even greater cuts, possibly two million barrels a day over the next nine months. When OPEC’s simply continued its current cuts, not seeing an additional move, a lot of people began to fear that oil prices would drop and we saw that in the following days trading. The takeaway for us here in the United States is not just about OPEC’s moves and the impact on oil prices but the broader ability of OPEC’s to move the market. I will submit to you that while OPEC’s still has the ability to drive oil prices down by adding oil to the market, they are beginning to lose their ability to drive prices back up. And while this might be challenging in the short run for oil producers here in the state of Texas and around the country.

In the long run, it signifies what a lot of us have been saying, that the United States is beginning to have a more dominant impact on the global oil market. That position of leadership and market dominance is what’s causing mineral prices and acreage prices here in the United States to go up continuously.

As I’ve said before, if you’re going to do any business, in the oil business, around the world, right now Texas is the place to be. Another tidbit that came out in the last week is the EIA expects U.S. production to reach 10 million barrels next year. Which means from 2008 to next year, the U.S. will have added more oil, five million barrels a day to the market, than we ever have in the history of the nation. So while OPEC’s is struggling to find its footing, the United States is continuing to find new ways to produce more economically and having a bigger impact on global markets. That is something that every Texan, every American, should get very excited about.

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About the Author
Ryan Sitton

Ryan Sitton

Ryan Sitton is a native Texan who grew up in the Irving area. He is a graduate of Texas A&M University where he earned a degree in Mechanical Engineering. Ryan founded PinnacleAIS, an engineering and technology company focused on reliability and integrity programs for the oil, gas, and petrochemical industries. He was elected to the Railroad Commission in 2014 to a six-year term. You can read more about Ryan HERE.

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