by Nicholas Sakelaris
Staff Writer- Dallas Business Journal
The Texas rig count dipped below 400 last week as another 19 drilling rigs come out of service. Though the total has declined by nearly 500 rigs in a year, Texas still boasts 42 percent of the rigs operating in the United States. The news comes with crude oil prices hovering just above $55 a barrel. Many energy companies have hunkered down and will only drill their core properties. If acreage is held by production, companies don’t have to drill at all.
With that in mind, the number of oil wells completed and put into production has fallen by nearly 50 percent, according to the Texas Railroad Commission. The commission reported 1,547 oil wells were completed in March compared to 2,965 oil wells in March, 2014. Texas has produced 930 million barrels of oil in the past 12 months.
Karnes County in the Eagle Ford Shale led Texas with 6.3 million barrels of crude oil produced in March, according to preliminary Railroad Commission totals. North Texas’ Barnett Shale continues to be the biggest natural gas producer with Tarrant County leading the way with 47.5 million cubic feet of gas produced, according to preliminary estimates. Johnson, Wise and Denton counties also rank in the top 10 for natural gas production. Crude oil prices have rallied in the past few weeks but don’t get excited yet.
“I think people should be gun-shy—this is a rally that has taken prices higher despite fundamentals that continue to point toward a sloppy crude market and a sloppy gasoline market,” said Tom Kloza, global head of energy analysis for the Oil Price Information Service. He referenced an “unsustainable spring peak” for gasoline futures that typically ends on April 20.
There’s been a lot of money chasing gasoline futures, including investors buying exchange traded funds (ETFs) but Kloza doesn’t think the current crude oil price is sustainable.
“We may see inventory growth slow in the U.S., but emerging markets are in a bit of quicksand thanks to the strong dollar and minimal internal growth,” Kloza said. Crude inventories have been a source of great concern recently but with fewer oil wells coming online, production rates should slow down, too. Kloza said he believes gasoline prices will peak soon nationwide, about $2.60 to $2.75 a gallon, then decline.
California is the one market where supplies are tight, but other states will see plenty of fuel as the crude surplus gets transitioned into gasoline and diesel,” Kloza said. Barring any major hurricanes hitting Texas, Louisiana or Mississippi, Kloza said most U.S. consumers should see gasoline prices below $2 a gallon later in the year.
Stay up to date on Texas energy news with the Energy Inc. news ticker, bringing you by-the-minute coveragRig counts continue to fall at a rapid rate from the Texas Business Journals.