Texas oil producers driving oil markets, leaving OPEC confounded
HOUSTON -- Sizable year-over-year improvements in the rig count, drilling permits, and the value of Texas-produced crude oil and natural gas, along with renewed industry employment growth combined to push the Texas Petro Index upward in July to 176.9, the eighth straight monthly increase since a punishing 24-month contraction, which ended in November 2016 with a revised TPI of 149.2. (Monthly TPI values were revised modestly over the entire history of the analysis, due to a shift in the way industry employment estimates are factored into the calculation of the TPI.)
A composite index based upon a comprehensive group of upstream economic indicators, the Texas Petro Index in July was 1.7% than a revised TPI of 173.9 in June and 14.9% higher than July 2016 when the TPI stood at 154.0.
"Oil and gas producers in Texas and across the U.S. responded swiftly to wellhead price increases that occurred when OPEC and other oil-producing nations agreed to curb output to fight excessive supplies on world oil markets," Karr Ingham, the economist who created the TPI, said at a news conference here today. "OPEC production curtailments did not achieve the desired price outcome, and once again Texas and the US are the chief offenders - and I say that with great pride," said Ingham. "Oil supplies remain plentiful because domestic producers are becoming increasingly efficient at producing crude oil at lower costs, so a $45/bbl oil market provides more incentive than in the past."
Ingham sees few reasons for U.S. oil production to decline because more producers can compete when oil is in the $45 range.
"But make no mistake about it, U.S. producers--and Texas producers, in particular--have backed OPEC and other producers around the world into a corner from which there seems to be no easy escape," Ingham said. "Where all of this may take us in terms of prices and global markets, no one knows.
"But Texas producers have flexed their muscles, not just in the expansion of 2010-2014, but over the course of the contraction as well, leaving OPEC utterly confounded and the U.S. squarely in the driver's seat."
The TPI peaked at a record 318.1 in November 2014, which marked the zenith of an economic expansion that began in December 2009, when the TPI stood at 190.2.
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