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Petro index sees signs of rebound

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The Texas oil and gas industry continued to shrink in the first six months of 2016 but rising prices and increasing rig counts might be signs that the oil patch is on the rebound, according to a statewide industry index.

The latest Texas Petro Index showed crude oil prices averaged $45.19 per barrel in June, reflecting the fourth-straight monthly increase since the average fell to a low of $27.08 in February. The state’s rig count also was higher in June than the previous month for the first time in two years, and the state issued 656 drilling permits, a 28 percent increase from February.

The job loss rate in the industry also slowed in June, with an estimated 900 jobs cut by oil and gas companies, according to the index produced by petroleum economist Karr Ingham for the Texas Alliance of Energy Producers. In January and February, the state was losing thousands of jobs a month.

While Ingham said he was seeing signs of “cautious optimism” in the oil patch, he warned against becoming overly confident. The reason? Even at rock bottom, Texas oil production declined only 5 percent in the first half. That means the oil glut that has been holding down prices is likely to continue.

With employment, for example, there typically is a six-month lag from when prices start to rebound and drilling companies start to employ people again, he said.

“Virtually nothing in this cycle that would correct the current contraction has occurred quickly or within the time frames that many had forecast,” Ingham said in his report. “The sharp price decline and resulting industry downturn was the direct result of market imbalance and rising crude oil supplies.

“Concerns about these very things remain in place, and there is presently no great sense that the difference will be made up on the demand side. While the end may be near in terms of TPI decline, there is every chance that the recovery ahead will be frustratingly slow.”

Among the other highlights in the report:

The statewide working rig count averaged 222, a 55.9 percent decrease when compared with the first six months of 2015 when an average of 504 rigs were drilling. In the first half of 2014, the number of rigs working in Texas averaged 869.

The Texas Railroad Commission issued 3,539 drilling permits, 36.4 percent fewer than in 2015.

Oil producers pumped about 603.9 million barrels of crude oil, a 5 percent, year-over-year decline compared with the 635.4 billion in the first half of 2015.

About 213,050 Texans were employed in the oil patch in the first half of the year, a 22.6 percent drop from the same period last year. In the first half of 2014, the number of people employed in oil and gas production, drilling and service sectors was 291,365. At its peak in December 2014, the industry employed 306,000 in December 2014.

Tags: oil, gas, energy, crude, drilling

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