U.S. oil companies rise again, poised for rebound

American oil producers, battered by rock-bottom prices in 2016, could be poised for a big comeback and the prospect of creating new jobs for oilfield workers.

The downside? Gasoline prices could head higher for consumers.

After the Organization of the Petroleum Exporting Countries and several non-OPEC nations agreed to slash production starting next month, oil prices have spiked, fueling hopes among oil producers that the United States' temporarily downtrodden energy sector will shed 2016’s blues in the new year.

After a record-setting number of bankruptcies for North American energy exploration and production companies in 2016, the sector is poised to reap the benefits of oil’s rebound and a massive increase in productivity powered by technological improvements.

In response to the OPEC action, U.S. shale oil producers are likely to boost production by anywhere from 600,000 barrels per day at a price of $55 to 1.1 million barrels per day at a price of $60, according to Macquarie analysts Vikas Dwivedi and Walt Chancellor. On Thursday, the benchmark U.S. crude was trading midday at $53.71 a barrel, down 35 cents or 0.65%.

“There’s ample room for producers to expand in response to higher prices,” said Rob Haworth, investment strategist and commodities expert at U.S. Bank Wealth Management, in an interview. “That’s the hard part here for OPEC — they’re trying to get the market into balance, but the wild card they’ve created is a more vibrant shale industry here in the U.S.”

OPEC agrees to oil production cuts

This year has been wickedly difficult for North American oil exploration companies, what's typically called the "upstream" end of the oil business, which bled profusely as oil tumbled below $27 per barrel in February, having lost nearly half of its value in about four months.

The commodity’s steep descent triggered thousands of layoffs as about 50 of those North American companies filed for bankruptcy in the first half of 2016, according to the Haynes & Boone Oil Patch Bankruptcy Monitor report.

But that pace slowed to a trickle in the second half of 2016, with only 18 companies filing for bankruptcy. And in the first two weeks of December, only one company did so, according to Haynes & Boone.

After reaching 31% in 2016, the oil exploration industry’s average loan default rate is projected to hit only 4% in 2017, Fitch Ratings analyst Joan Isi Okogun estimated.

“The pipeline for restructuring candidates has thinned out, and oil prices are showing some stability following the OPEC announcement,” Okogun said in a research note.

Oil’s crisis in 2016 turned into something of an opportunity, as U.S. shale oil companies that had loaded up with bad debt shed their liabilities and bolstered productivity with new drilling techniques that have lowered their point at which they turn a profit.

“They had to get really lean and mean.” Oil Price Information Service analyst Tom Kloza said in an interview.

Now, many of the most efficient shale oil producers “can make as much money” at $45 per barrel as they made when at $90 per barrel a few years ago, Kloza said, and “they have been quietly ramping up their rigs” in recent weeks.

There’s plenty of room for growth. The number of active oil rigs is still down about 60% from its peak, Haworth estimated.

Expect a particularly swift uptick in areas such as the Permian Basin in Texas and the Bakken Region in Montana and North Dakota.

“There’s no question in my mind — if crude oil hangs between $50 and $60, the big winners are U.S. shale,” Kloza said.

For consumers, the increased momentum for the oil business means higher costs at the gas pump.

Patrick DeHaan, petroleum analyst at GasBuddy.com, said gas prices could hit $3 per gallon in some areas of the U.S. in the spring. The average national price was up 29.4 cents per gallon from a year ago to about $2.294 on Wednesday, according to GasBuddy.

OPEC’s ability to convince non-OPEC countries such as Russia to join the cuts brigade lent credibility to the cartel’s attempt to bolster prices. Prices fell as investors became optimistic that production cuts will ease a global glut of oil that depressed prices over the last two years.

Consequently, gas prices may not revisit their lows below $2 per gallon at many U.S. stations any time soon.

“This looks like more of a sustained rally,” DeHaan said. “The market is clearly expecting extensive cuts — more extensive than anticipated.”

Although motorists will be paying more at the pump, some consumers are set to benefit from oil’s upswing.

Newly employed workers in oil-rich areas such as Texas, Wyoming, North Dakota and the Gulf states are expected to increase their spending on consumer goods.

Beneficiaries could include companies such as western-wear retailer Boot Barn Holdings, country-club firm ClubCorp and power sports manufacturer Arctic Cat, Jefferies analyst Trevor Young said in a research note.

Those companies “have geographic exposure and a customer base tied to commodity-sensitive local economies that position them favorably should oil continue to rebound,” Young said.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.