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North Dakota oil industry leader welcomes OPEC news

The head of North Dakota's oil industry association said the news that a group of oil-producing countries would cut production next year is a "sign of optimism," but how much the decision boosts prices remains to be seen.

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A drilling rig operates near Keene, N.D., on Monday, March 14, 2016. North Dakota's drilling rig count is down to 29, the lowest since October 2005. Amy Dalrymple/Forum News Service

The head of North Dakota's oil industry association said the news that a group of oil-producing countries would cut production next year is a "sign of optimism," but how much the decision boosts prices remains to be seen.

Ron Ness, president of the North Dakota Petroleum Council, welcomed the Organization of the Petroleum Exporting Countries' decision to reduce output by about 1.2 million barrels per day to 32.5 million barrels per day in January. It's the first time OPEC agreed to output cuts since 2008, according to Reuters.

Oil prices dropped drastically in the second half of 2014, according to the U.S. Energy Information Administration's tracking of the West Texas Intermediate spot price. In July 2014, oil was above $100 per barrel, but it sat at $45.66 a barrel on Monday.

The price drop hit North Dakota's oil industry hard after boom years in the Bakken. On Monday, there were 39 active drilling rigs here, down from the 191 three years ago, according to the North Dakota Department of Mineral Resources.

Ness said an oversupply of oil and a sluggish world economy were among the factors that drove the price drop, while OPEC's decisions have some "short-term impact." OPEC produces about a third of the world's oil, according to Reuters.

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"We need to restore some financial strength into these companies so they can get back to beginning to attract investment," he said. "I think this is a sign to the markets that maybe there's some optimism ahead."

Ness said it's too early to tell whether OPEC's decision would boost prices and ramp up activity in the Bakken.

"Certainly, the markets are reacting favorably today, but I think as you've seen with oil, it seems like it bumps up and then it goes back as soon as the next report is out (and) the inventories are high," he said. "Even if we can get the price into the $55 range, that can restore some financial health back into the industry."

Ness said drilling and exploration costs have been "dramatically" reduced here, and well efficiency also is improving.

"Those things are going to be significant to the Bakken, in terms of competitiveness going forward because there are a lot of places to put your dollar," he said.

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Ron Ness

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Ron Ness

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