Alex Mills
By Alex Mills
While crude oil production in the U.S. seems to have leveled off, oil production in Texas continues to move forward at a brisk pace.
The Energy Information Administration (EIA) said that US oil production declined slightly by 0.5 percent or 50,000 barrels per day (bpd) in May from the prior month to an average of 9.7 million bpd.
In Texas, however, crude oil production increased 16 percent in May to 107 million barrels (3.6 million bpd) from 92 million barrels (3.1 million bpd) in May 2014, according the Texas Petro Index.
The surplus of oil in Texas and worldwide has created a softening of price. Prices declined on the New York Mercantile Exchange (NYMEX) on July 7 to $51.98 the lowest price since April 13 and a 17 percent drop since its 2015 high of $62.58 in May. The six-year low was set on March 18 at $42.03.
The recently release Texas Petro Index shows that crude oil prices averaged a decline of 43 percent in May compared to the same month last year. Crude oil prices averaged $55.95 in May and $98.32 in May 2014.
With the decline in price come the decline in the rig count, drilling permits, oil completions and even employment. The rig count is down 58 percent with just 375 rigs running in Texas in May. Drilling permits were off 61 percent, oil well completions were down 36 percent, and employment declined 3 percent.
Every category in the Texas Petro Index declined in May – except for oil production – making the index decline to 265.4, which is a 15 percent decline from it high of 312 in October 2014.
The EIA expects US production to decline from April 2015 to February 2016. It called for US crude oil output to average 9.47 million bpd in 2015 and 9.32 million bpd in 2016.
“While US crude oil production is expected to decline over the months ahead, total output in 2015 is on track to be the highest in 45 years,” said EIA Administrator Adam Sieminski.
The EIA also raised its forecasts for US oil consumption. “US gasoline demand will likely top 9 million bpd this year for the first time since 2007, which reflects record highway travel,” Sieminski said.
The EIA said international petroleum supplies would average 95.46 million bpd in 2015 and 95.67 million bpd in 2016, up from its prior projections of 95.24 million bpd in 2015 and 95.48 million bpd in 2016.
Consumption is projected to average 93.63 million bpd this year and 95.03 million bpd next year.
The EIA said WTI crude prices would average $55.51 per barrel this year, up from its previous forecast of $55.35 per barrel. The US price averaged $93.17 per barrel in 2014. The EIA lowered its 2015 forecast for Brent to $60.22 per barrel from $60.53 per barrel. In 2014, Brent averaged $98.89 per barrel. It maintained its 2016 forecasts for US prices to average $62.04 per barrel and for Brent to average $67.04 per barrel.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
I think a lot of people who thought they could get rich in the oilfield are learning a tough lesson now.
Alex, as President of the Texas Alliance, don’t you think you should address this ? What if the data is wrong ? What caused the anomaly ? “oil production increased 16 percent in May to 107 million barrels (3.6 million bpd) from 92 million barrels (3.1 million bpd) in May 2014, according the Texas Petro Index.”
Alex, 3.6MM bpd versus 3.1MM bpd is a 500K barrel a day increase, giving the reader the impression that 1000 wells each producing 500 barrels a day must have somehow been completed and producing. It does not seem rational does it ?
What accounted for such an increase in the economists’ Texas Petro Index ?