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Energy Update - February 2018

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February 1, 2018

The number of active drilling rigs at work in Texas on January 26th was stable around 466, slightly higher than last month's count, and significantly more than last year, according to oilfield services firm Baker Hughes. Nationally, there were 947 rigs at work, up from 929 at this time last month. Overall, US crude production rising slightly each month since September and is nearly 9.9 million barrels/day, according to the Energy Information Agency.

The price of West Texas Crude rose slightly since June 2017, and in January remained around  $63 per barrel while the price of Brent Crude reached about $69 per barrel. Also, in January the price difference between Brent Crude and West Texas Intermediate is the lowest in five months, meaning foreign buyers may be less incentivized to buy U.S. crude. However, experts do not expect a large drop off in exports and predict that crude output will exceed 10 million barrels per day in 2018, rivaling Saudi Arabia's production. Additionally, the Energy Information Agency is predicting relatively flat crude oil prices throughout 2018 and 2019, with global production increasing the most in the U.S. and production becoming slightly higher than global demand.

Recently, President Trump announced a 30% tariff on imported solar cells and panels. However, the tariff will decline by 5% each year over four years and does not include the first 2.5 gigawatts of foreign-made solar cells. This move is expected to slow the solar industry's growth and may be felt more in states like Texas that don't offer subsidies. The news comes at a time shortly after a California-based company began construction in Pecos County on the largest utility-scale project in Texas. At 236 megawatts the solar array is expected to power around 50,000 homes. Although similar utility scale projects that are not yet under construction may be scaled back or canceled, the Electric Reliability Council of Texas (ERCOT) still predicts that Texas solar capacity will triple by 2020 to nearly 3,000 megawatts.

Wind is also expected to grow nationally and in Texas in 2018. According to the Energy Information Agency, wind power production will outpace hydropower within the year. Another report predicts that there will be over 15,000 jobs in the Texas wind industry by 2020.