An agreement among member nations of the Organization of Petroleum Exporting Countries to reduce output by one percent was announced Wednesday morning.
Details of the finalized agreement among OPEC producers currently remain thin, but a one percent reduction from 33.6 million barrels a day has been announced, according to The Wall Street Journal.
Ahead of the finalized agreement, crude jumped nearly eight percent to $48/bbl and continues to steadily climb.
The Journal reported that in addition to an OPEC-specific agreement to reduce output, leading members of the crude cartel intend to reach out to spur outside cooperation as well.
Steve Everly of FTI Consulting told Breitbart Texas to remain cautious about the news, noting that some OPEC members have already signaled they will renege on the agreement if non-OPEC nations do not agree to similar caps in production.
“The devil is always in the details,” Everly added.
A Washington-based energy think tank largely echoes Everly’s views. Daniel Simmons, Policy VP for the Institute for Energy Research, expects that crude prices will rise, but is “skeptical that the price of oil will go above $60” unless OPEC manages to enforce the cap on all members, something cash-strapped nations may be inclined to violate.
With respect to a return in domestic production, Simmons argues OPEC is “between a rock and a hard place.” Cutting output most certainly cramps the cash flows of cartel members, but allowing for a more bullish crude market could trigger the “thousands” of drilled but incomplete wells dotting the United States coming online, with additional projects beginning thereafter. OPEC is keenly aware of America’s capability to tip markets, given that the domestic boom lasting from 2008 to 2014 accounted for an 82 percent increase in global output.
“U.S. producers will serve to limit a dramatic run-up in the price of oil as would have happened 10 years ago with this kind of announcement,” Simmons added.
The agreement and subsequent oil market rally follows the latest, record-shattering discovery of shale oil and natural gas deposits in the Permian Basin region of western Texas.
This story will be updated as new details are confirmed.
Logan Churchwell is the Assistant Editor and a founding member of the Breitbart Texas team. You can follow him on Twitter @LCChurchwell.