The recent agreement by OPEC to cut production beginning in January is good news for balancing the global supply-demand equation, but it could backfire if higher oil prices cause U.S. producers to start drilling too much, warned Harold Hamm, chairman and CEO of Continental Resources Inc. (NYSE: CLR).
“One of OPEC’s greatest fears is that we will go out and hire all these rigs and start up again. They know they have to make believers out of us, so we can expect, and should expect, them to act [if U.S. production increases again],” Hamm told Hart Energy.
Hamm is glad OPEC made a deal because it should take some of the “lumpiness” out of the market and will also help producers and consumers. However, producers should be “forewarned or they’ll get left out on a limb and won’t have the oil price to justify it,” he said.