The most recent report from the Federal Reserve Bank of Dallas for June 2017 shows that many indicators for the oil and gas sector continued to increase in May. While WTI crude dropped slightly, production growth continues to stay strong, especially in the Permian basin.
Below is a summary of the report from the Dallas Fed. For more details and graphs, be sure to visit their website.
Oil and Natural Gas Prices
The Dallas Fed reported that despite early hopes that production cuts from the Organization of Petroleum Exporting Countries (OPEC) would mean lower global crude inventories, lack of confidence led to a decrease in the average WTI spot price to $48.48 in May from $51.06 in April. Natural gas prices increased by two pennies to $3.10 per MMBtu.
Oil and Gas Employment
The oil and gas industry is gaining new jobs. U.S. employment rose by 3,800 jobs in April. Guess which state accounted for 55 percent? You got it–Texas. Texas oil and gas extraction employed 92,100 jobs with another 122,000 in support activities for mining.
Eleventh District Oil Production
Why is this number important? Because it shows that production in the Permian Basin rose in May–again. It’s no surprise to anyone that the number continues to climb. The EIA showed an increase of 53,400 barrels per day to 1.29 million. In the Eagle Ford, production continues to rise as well, although not as much as in the Permian. The Eagle Ford showed an increase of 33,000 barrels per day. The two areas together account for approximately 3.6 million b/d. That’s a heckuva lot of oil.
Texas Rigs by Trajectory
Anyone watching the weekly Baker Hughes rig count knows that the Permian basin consistently adds rigs. Texas, too, is usually leading the reports, despite a small drop last week (June 9). Horizontal rigs account for much of these totals, and the Dallas Fed reported that vertical and directional rig counts in Texas fell by 2 in May. Most expect the rig count in Texas to continue to climb over the next six months.
U.S. Crude Oil Exports
Since the crude export ban was lifted in 2015, the Dallas Fed report shows that it wasn’t until this year that we saw a significant increase in exports. Exports increased from 733,000 b/d in April to 926,800 b/d in May. The Fed attributes some of this to the Ingleside Energy Center Terminal at the Port of Corpus Christi.
Gasoline Exports to Mexico
Partly due to the Mexican government’s energy reform program, the demand for imported gasoline has decreased. PEMEX saw recovery of refined products’ prices in addition to completed refinery maintenance. This mean that there was less need to buy from the United States. The Dallas Fed report showed a substantial low of U.S. exports to Mexico at 273,000 b/d in March, which was almost half of what was exported in December of 2016.