While OPEC and other oil producers hold back, Texas producers take up the slack

FILE PHOTO: An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S. on May 3, 2017. REUTERS/Ernest Scheyder

On the recent rise in Texas crude oil production, economist and creator of the Texas Petro Index (TPI) Karr Ingham stated, “Texas producers are responding to higher wellhead prices that have resulted from coordinated efforts by OPEC, Russia, and others to curtail oil production, but in large part, production growth in Texas and the U.S. is keeping a lid on crude oil prices, which continues to frustrate parties to that agreement.”

Ingham also went on to say, “Producers in Texas and across the U.S. will gladly take the market share given up by nations that attempt to manage oil markets and prices by centralized decisions to manipulate production.” Currently the United States is exporting 1.3 million barrels per day, which is almost the amount of oil that OPEC and other producers have removed from the markets.

Oil production in Texas was up 2% in April compared to the same month last year. The TPI for April 2017 was 164.8, compared to 164.3 for April 2016. While being a very small increase, it still is the first year-over-year increase in 27 months.

The Texas Petro Index gets calculated monthly based on a complete set of upstream economic indicators such as: wellhead prices for crude oil and natural gas, the number of drill rigs at work, well-permitting activity, and the value of Texas-produced oil and gas.

The record high for the TPI came in November 2014 at 313.5, which was the high point of an oil production boom that began in December of 2009 when the TPI was at 187.4

Texas produced 99.55 million barrels of crude oil in April, which is up 2.3% from April 2016. However, the value of that crude totaled close to $4.7 billion, which is up 27.9% from April 2016.

Texas natural gas production was down from April 2016, reporting an output of 651.8 billion cubic feet this April. Again, increased prices greatly helped the Texas-produced gas to bring in $1.92 billion, up 44.1% from April 2016’s earnings.

Texas more than doubled the number of active drilling rigs in the state from last year. Baker Hughes counted an average of 425 rigs this April compared to the 196 rigs working last April. The highest number of working rigs averaged 946 in September 2008. The number of drilling permits increased this April to 909 issued, compared to the 683 permits issued last April.

One very important factor in the TPI for Texans, is the number of people employed on the upstream side of the oil and gas industry. This April, there was roughly 204,550 Texans on oil and gas company payrolls, which is up 2.7% from last April. The highest count of Texans employed by the oil and gas industry came in December 2014 at 306,000.

Texas oil and gas producers may be frustrating the global efforts to raise future prices, but the flip side equals more money and jobs for the state right now.

Article written by HEI contributor Raymond Arrasmith.

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