Back in September, several analysts at Goldman Sachs were the first to predict the bottom of oil prices near $20-$25 per barrel. Goldman has recently revised their previous forecast of a decline of 725,000 barrels per day in production to 650,000 barrels per day. The current surplus of crude was originally predicted to end near the beginning of 2017 but may prove to last longer still.
These revised predictions show the resiliency of the US oil and gas market as production from Texas and Oklahoma continue to charge ahead. The East Texas basin continues to rely on the excellent reservoir quality formations and improved oil field technology as it produces higher than expected volumes of hydrocarbons. Across both Texas and Oklahoma, “efficiency gains have enabled producers to drill wells faster, and some gathering pipelines came online earlier than expected, allowing them to beat well performance estimates” according to Cabot Oil and Gas’ CEO Dan Dinges.
This better than expected production has only delayed the inevitable for these powerhouse energy producing states. Emily Kerr, economist for the Dallas Federal reserve stated that “economic growth in Austin and in Dallas continued to boom in 2014 and even through 2015, but now in 2016 so far we’ve seen a deceleration in job growth in those metros.” These gains came with over 5,500 job losses in the state within the oil and gas industry. Kerr went on to say, “despite the weakness that we’re seeing in Houston and the energy sector and the slowing that we’re seeing in some of the other sectors, we do expect the Texas economy to post positive job growth this year.”
Still both states continue to trudge on, facing budget problems due to a lack of sustained production. Other voices across the country share different views on the decline of oil and gas surpluses as reserves from the Midwest prove even more resilient than those of their siblings in the south. However, Stephen Schork, president of energy consulting company Schork Group Inc. has been happy with production. “The Marcellus is still going like gangbusters. We’re probably going to see some oil production rising as prices improve, which means associated gas production will also come back,” says Schork.