Texas crude oil production in July remained resilient against low wellhead prices, jumping 15% year-over-year to remain on track to break the state’s annual production record set in 1972, according to data from the Texas Alliance of Energy Producers (TAEP).
Estimated output during the month totaled 111.2 million bbl. With crude oil prices averaging $47.93/bbl, however, the value of Texas-produced crude totaled more than $5.3 billion, down 44.3% from July 2014.
Consequently, the Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators, continued its precipitous decline set in motion by the state’s over-supplied oil markets, dropping 20.6% year-over-year to 245.5. June’s TPI was down 18% year-over-year despite higher oil production and industry jobs estimates during the month (OGJ Online, July 29, 2015). Jobs estimates fell again in July.
Before embarking upon the current economic downturn, the TPI peaked in October 2014 at a record 312—down 21% compared with the most recent figure—marking the zenith of an economic expansion that began in December 2009 when the TPI stood at 187.7.
“Oil production is still growing year-over-year, but the margin of growth is narrowing,” explained Karr Ingham, economist and creator of the TPI. “That trend will continue. I still expect crude oil production statewide to peak sometime in the second half of 2015, perhaps even in the third quarter, but the question is will monthly crude oil production go negative compared to year-ago levels by yearend? Not by my calculations it won’t.”
Ingham reiterated that “market fundamentals simply do not point to higher crude prices,” and substantial downward pressure is still present.
“Even if crude oil production peaks and begins to decline, it still has to go down far enough to begin to affect the broader supply-demand imbalance. A rapid drop-off in the second half of 2015 would be a solid move in that direction,” he said.
He noted that the “scariest market outcome” would be a post-2014 crude market that even somewhat resembles the post-2008 natural gas market, with “production and supply capabilities that could keep prices relatively depressed for several years into the future.”
Estimated Texas natural gas output was about 750 bcf, a year-over-year monthly increase of 2%. With natural gas prices in July averaging $2.80/Mcf, the value of Texas-produced gas fell 29.5% to about $2.1 billion.
The average number of Texans on oil and gas industry payrolls in July was 285,500, down 4.5% compared with July 2014 and 6.4% compared with the record of 305,000 recorded in December 2014, according to data from the Texas Workforce Commission.
The nadir of upstream oil and gas industry employment in Texas was 179,200 in October 2009. During the previous growth cycle, industry employment peaked at 223,200 in November 2008. Oil and gas employment data is not seasonally adjusted, but the TPI notes that “some statistical work” with the data indicates job loss thus far during the industry contraction totals 23,800.