TAEP: Oil oversupply pushing down economic indicators in Texas

The latest Texas Petro Index reflects the ongoing contraction of the upstream oil and gas economy in Texas, falling 10.7 points to 235.4 in August compared with July.

The composite index, based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Energy Producers (TAEP), is now down 24.3% year-over-year and 25% from the peak index value of 313 in October 2014.

TAEP notes the oversupply of crude oil in Texas has driven down just about every industry economic indicator, including the price of oil, the rig count, drilling permits, well completions, employment, and thus the index itself.

State crude output, meanwhile, continues to post higher year-over-year numbers. Production in August totaled 110.5 million bbl, up 12.3% year-over-year, and remains on schedule to break the annual record set more than 40 years ago. With crude prices averaging $39.67/bbl, the value of Texas-produced crude totaled more than $4.38 billion, down 51.9% compared with August 2014.

“The Texas Petro Index is designed to filter out day-to-day fluctuations and chronicle substantive upstream oil and gas economic trends in Texas, notably industry expansion and contraction,” said Karr Ingham, economist and TPI creator. “Through August, the TPI leaves little doubt that the contraction remains firmly in place, and that the change from contraction to expansion is not yet in sight.”

Ingham said even though the rate of production growth is slowing with each passing month, analysts have continued revising estimates of monthly oil production upward, both in Texas and across the US.

“The Energy Information Administration has revised its production-estimation methodology and now says Texas production likely peaked in April,” Ingham said. “That may be right, but either way Texas production is still significantly higher this year compared to last, and that’s not likely going to change by yearend.”

During the month, the Baker Hughes Inc. count of active drilling rigs in Texas averaged 385, compared with 900 in August 2014.

The number of Texans on oil and gas industry payrolls averaged 281,600, down 6.6% from August 2014 and 7.7% from the record of 305,000 Texas oil and gas employees recorded in December 2014, according to statistical methods based upon Texas Workforce Commission estimates.

TAEP notes that oil and gas employment data is not seasonally adjusted, but some statistical work with those numbers suggests the loss thus far during the contraction totals 28,300 industry jobs.