Crude oil supplies dim prospects for industry recovery in 2016

Tom Hinde

According the the Texas Petro Index (TPI), Texas wells yielded an estimated 1.27 billion barrels of crude oil in 2015. 2015 production defied severe curtailments in permitting, drilling, and completions by producers all over the state. Crude oil prices at year-end were down by as much as 70 percent since mid-2014.

Compared to peak levels established in 2014, the rig count is now by 68 percent, drilling permits are off 70 percent, and oil and gas well completions have each declined by about 60 percent according to TPI. Karr Ingham, the economist who created the TPI and updates it monthly, said the steep declines of upstream activity resulted in massive layoffs that caused total oil and gas industry employment to decline from a record 306,330 in December 2014 to about 246,150 in December 2015.

As 2016 begins, Ingham sees a global market glutted with supply--crude production at unexpectedly elevated levels, large volumes of crude in storage, and the imminent return of Iranian oil into the marketplace. "At this point," he said, "it seems quite sate to assume the Texas Petro Index will remain in decline for at least the first half of 2016 and perhaps most of the year."