Oil and Gas Update - June 2015

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June 1, 2016

Declining world and U.S. production coupled with strong demand for gasoline began to put a dent in historically high crude oil inventories last month, contributing to a rise in the price of a barrel of oil to the $49 range. The price exceeded $50 a barrel at one point in late May for the first time since October.

The U.S. Energy Information Administration reported that as of the week ending May 20 crude oil inventories decreased by 4.2 million barrels from the previous week. The agency reported that at 537.1 million barrels, U.S. inventories remain high after breaking a 77-year-old record in April.

Still, the price increase is not enough to entice most operators to put drilling rigs back to work, analysts said. Baker Hughes' weekly rig report in late May showed that 404 rigs were drilling for oil or gas in the U.S., the fewest since 1999. The count in Texas was 173, which is still 43 percent of the U.S. rigs at work.

U.S. crude production continued its slow decline after record highs last year, dropping to 8.8 million barrels a day. But the Railroad Commission of Texas reported that preliminary figures for statewide oil production in March rose to 2.51 million barrels a day, up from 2.42 million barrels a day in the previous month and 2.31 million barrels a day in March 2015.

The railroad commission reported that it issued 683 new drilling permits in April, up from 511 in March but down from the 848 issued in April 2015. Producers still are working on a backlog of permits, and 1,047 well completions were reported in April, compared to 1,141 the previous month and 2,307 in April 2015.

In Senate District 19, Reeves County continued to climb in the list of the top 10 Texas counties for crude oil and condensate production in March, the latest month for which figures are available. Reeves was up to number 6 on the condensate list and number 7 on the crude oil list. Production in Reeves has been rising after an extended period of heavy drilling activity just before and after the price crash began almost 2 years ago.