OPEC announced Wednesday that its nations have agreed to cut its oil production for the first time in eight years in an effort to boost crude prices.
Some American analysts, including several in Texas, have a range of opinions about whether the actual effects will cut world oil production or boost the price of oil as much as some OPEC leaders have predicted.
In the very short run -- the day the OPEC announcement was made -- the price of WTI crude oil settled to a price up about $3.75 from the day before. But it was still lower than it was even in September of this year.
Bruce Bullock, director of SMU's Maguire Energy Institute, had some predictions about what the OPEC plans would accomplish.
Years of better oil production in the United States, and in Texas shale particularly, may have forced OPEC nations into reaching their first agreement in eight years, Bullock said.
"The American shale producers had become so efficient that OPEC would likely continue to lose market share and revenue were they not to take some type of action to firm the market," he said.
He figures there's a possibility of crude oil going up some -- to a range of $50 to $55 a barrel. That's higher than it's been since last year but still a lot lower than it had been for most of the past decade.
Todd Staples, president of the Texas Oil & Gas Association, says oil producers in this state need to see whether the OPEC plan has a consistent effect.
"It will be interesting to see if OPEC's deal holds and has a lasting impact on global oil prices," Staples said.
It may be that the power of the American oil and natural gas industry may make this country more secure and less dependent on OPEC or any other countries, he said.
Texas Railroad Commissioner Ryan Sitton said he was generally optimistic that OPEC nations would meet the new agreement and that the effect would raise the price of crude oil and help Texas oil companies.
"I believe that OPEC is desperate to see an actual decrease in global production and accompanying rise in price so, I doubt that there will be much cheating with this agreement," Sitton said.
And that's going to help American companies to start producing even more crude oil, he said.
"I believe that the amount of increased domestic production will correlate nearly perfectly with the increase in the price of oil. If the OPEC reduction has the intended effect on price, domestic producers will very quickly bring additional production online," Sitton said.
OPEC made specific announcements Wednesday about the plan:
* The cartel will cut 1.2 million barrels a day from its present output after its 14 members put aside differences at a meeting Wednesday to agree on individual production levels.
* The move, which will leave OPEC output at 32. 5 million barrels a day, is to take effect in January, said OPEC President Mohammed Bin Saleh Al-Sada.
Al-Sada said major non-OPEC producers were ready to act in concert with OPEC and tentatively planning to reduce their output. He did not list the countries involved beyond saying Russia was prepared to cut 300,000 barrels from its output of more than 10 million barrels a day.
Al-Sada also announced that Indonesia had suspended its membership rather than agree to its share of cuts.
The price of crude, which had soared earlier in the day amid anticipation of a deal, went up as much as $3.48, or 7.4 percent, at $49.86 a barrel.
A production cut could have a lasting impact on consumers as oil price increases feed into the cost of car fuel, heating and electricity. It could also restore some authority to OPEC as an arbiter of prices and supplies after years of inconclusive meetings undermined by infighting.
One of the biggest hurdles had been a rivalry between Saudi Arabia and Iran, whose struggle for dominance in the Mideast is also playing out in the Organization of the Petroleum Exporting Countries.
The Saudis have long been hesitant to shoulder the lion's share of a cut, while Iran has resisted reducing its own production. It argues it has yet to recover its output levels hit by years of sanctions.
Al-Sada said that Saudia Arabia, the biggest OPEC producer, will cut 486,000 barrels from its production of more than 10 million barrels a day.
But it's a lot too soon to assume what the effect of OPEC will be, said Investing.com senior editor Clement Thibault. Wednesday's jump in crude oil prices may have shown too much optimism, he said.
"There's no evidence that OPEC members will stick to the agreement," he said. "It's one of the reasons I find the immediate reaction somewhat premature. Non-OPEC countries, especially Russia, who agreed last week to freeze the production rate -- without cutting it -- will be a major factor in oil's near future."
Material from the Associated Press was used in this report.
