A “wild downhill” oil price ride has claimed 35,000 jobs in Texas, according to a new report.
The Federal Reserve Bank of Dallas published its quarterly energy update, detailing the pressure and strain of market uncertainty.
The report, which covered the second quarter of the year, read: “The U.S. oil and gas industry continued contracting in the second quarter. U.S. crude oil output has fallen 0.5 mb/d since March to an estimated monthly average of 8.7 mb/d in June. The latest available data show that more than 35,000 jobs in oil and gas extraction and in support services for oil and gas were cut through April.”
Bankruptcies were up 60% to 48 in the second quarter and associated debt increased more than seven-fold to around $38.5billion, according to the latest numbers from Haynes and Boone LLP.
However, the Texas’ energy market wasn’t all doom and gloom, according to the report.
“After a wild downhill ride at the start of the year, oil prices began ascending in the second quarter,” it read.
“Prices rose as market participants found some assurance that global inventory build-ups are slowing.”
And the number of firms reporting an improved company outlook increased from 20% to 40%, according the Dallas Fed survey.
“Fifty-dollar-per-barrel crude oil was once considered too low for much of the U.S. oil and gas industry to survive,” the report read.
“Energy survey results show that while this price level can support new drilling activity for a substantial share of firms, prices remain slightly below average breakeven levels for most geographic areas.”
The report also took a stab at OPEC stating “inaction” has become its “new normal”.
“While Saudi Arabia increased production 0.6 mb/d in 2015, the country’s plans imply an increase of that magnitude is unlikely going forward,” it read.
“If world demand continues to grow at the current rate of about 1.3 mb/d until 2020, it is difficult to see how OPEC production increases alone can meet demand. This suggests some role for future production increases in the U.S. and other non-OPEC countries in the medium term.”
Finally, the report highlighted the biggest threat to energy recovery in the US – Brexit.
“Oil prices fell at the end of the second quarter following the U.K.’s vote to leave the European Union,” it read.
“The decision also led to a sharp jump in broader financial market volatility and declines in global stock markets. It remains to be seen how this will affect global economic growth and, hence, oil consumption. If the repercussions are limited to the U.K., the impact on oil consumption will be small because the U.K.’s share of global oil consumption is only 1.6%.
“However, substantial negative economic spillovers to the euro area or to the global economy would have a significant effect on the demand side, representing an important new downside risk to prices.”