You are here: Home » Reuters » News
Business Standard

U.S. shale producers see OPEC pullback helping 2019 profits

Reuters  |  HOUSTON 

By Jennifer Hiller

(Reuters) - U.S. shale producers cheered OPEC's decision to trim output, a move that sent crude prices higher on Friday, closing at levels that executives said would keep their profits flowing.

The Organisation of the Exporting Countries and Russia-led allies agreed to trim output by 1.2 million barrels per day (bpd) beginning in January. The reduction was larger than the 1 million bpd cut that analysts had expected.

U.S. futures settled up nearly 2 percent at $52.61 on Friday after trading as much as 4.5 percent higher during the day. Prices peaked at above $76 in early October but had plummeted to about $50 ahead of this week's meeting.

"As long as a like me can expect $50 or better, we can do fine; $50 works for me," said Harvey Howell, of H.H. Howell Inc, a San Antonio, Texas,

Halting the steady decline towards $40s a barrel range provides confidence that U.S. companies can profitably expand drilling next year. On Thursday, set a 2019 capital spending budget that includes a 21 percent increase in spending on shale.

Without OPEC's decision to pull back, "we were going to see oil in the $40s," said Steven Pruett, of He called the move a "relief" that and allies were able to agree to the coordinated cuts.

"It's good for us. It keeps the capital flowing," said George Wommack, of Petro Waste Environmental LP, the largest in the Permian Basin of West and He said service companies "have all been on the edge of our seat watching "

Shale investors have been pushing companies to generate higher profits instead of increasing production, and a further drop in would have slashed cash flow needed to cover production costs and deliver shareholder payouts.

"What investors want to see is discipline in a low commodity price environment," said Sameer Panjwani, an at investment firm Tudor, Pickering,

stocks have suffered this year. A fund that tracks firms, the SPDR S&P Oil & Gas Exploration & Production ETF, is down 14.5 percent year to date and was flat on Friday.

between $55 to $65 per barrel are a "sweet spot for the U.S. producer and the U.S. consumer," said Rob Thummel, at investment manager

"We think are the key to bringing investors back to the energy sector," Thummel said.

(Reporting by and Collin Eaton; Editing by Sandra Maler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sat, December 08 2018. 03:53 IST