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OIL AND GAS
Texas oil production increased in June
by Daniel J. Graeber
Austin, Texas (UPI) Aug 28, 2015


Oil unable to sustain rally
New York (UPI) Aug 28, 2015 - A slight increase in U.S. consumer spending wasn't enough to offset concerns about China's economy, pushing crude oil prices lower after Thursday's rally.

A resurgence in the Chinese stock market and strong figures for U.S. gross domestic product pushed Brent and West Texas Intermediate crude oil prices up more than 10 percent Thursday for the largest one-day rally since 2009.

U.S. GDP was revised up Thursday to an increased annualized rate of 3.7 percent during the second quarter, up from the initial estimate of 2.3 percent.

The Commerce Department said Friday personal income increased by 0.4 percent to $67.1 billion and disposable income increased by 0.5 percent to $61.5 billion in July in part because of wage growth.

"Wages and salaries increased $35.8 billion in July, compared with an increase of $14.3 billion in June," the department said.

Crude oil was unable to sustain Thursday's rally, however, despite positive U.S. economic news. West Texas Intermediate, the U.S. benchmark for crude oil prices, fell 1.4 percent below the previous close to $41.93 per barrel. Brent crude oil lost 1.3 percent to sell for $47.03 per barrel in early Friday trading.

The Shanghai Composite Index closed up 4.8 percent by the end of Friday trading in Asia. The rally came despite a poor showing for Chinese industrial firms. The National Bureau of Statistics said industrial profits fell 2.9 percent year-on-year for July, sharply lower than the 0.3 percent decline reported last month.

In an effort to infuse more cash into the ailing market, Beijing said Friday about $313 billion from the national pension fund was available for investments into new products, including Chinese stock markets.

Expected Chinese economic growth was used in part as justification from the Organization of Petroleum Exporting Countries to keep oil production steady. A market move toward the supply side is contributing to the decline in crude oil prices.

A Texas energy regulator said total crude oil production for June, the last full month for complete data, was up around 12 percent year-on-year.

The Railroad Commission of Texas said crude oil production in June averaged about 2.43 million barrels per day, up from the 2.15 million bpd reported in June 2014.

June data show the third straight month for gains for the No. 1 oil producer in the nation. April crude oil production of 2.31 million bpd was a 13 percent increase year-on-year. Decreases were posted, however, in early 2015.

The railroad commission, the state's energy regulator, said the average Texas rig count as of Aug. 21 was 383, which represented about 45 percent of all U.S. onshore rig activity.

A report from Fitch Ratings this week found some Texas cities like Houston, which hosts the headquarters of several major energy companies, were pressured by the weak crude oil market.

For the state as a whole, tax collections for June were down 1.4 percent year-on-year, marking an end to a near five-year streak of gains.

The Dallas Federal Reserve found the state as a whole added 35,800 net jobs in July for the largest monthly gain so far in 2015, but stressed the momentum might not last.

A report published earlier this week from analytical firm Wood Mackenzie finds some shale basins in Texas are nevertheless resilient despite the slump in the overall oil sector.

"Companies are still increasing production over 2014 averages and active rigs are producing more," upstream analyst Jeremy Sherby said in a statement.

Lower crude oil prices leave energy companies with less capital to invest in exploration and production. Most companies have cut staff and spending and reported weak profits during the downturn as crude oil prices move below the $50 per barrel mark.

Wood Mackenzie finds most companies working in the Eagle Ford shale basin in Texas are breaking even at around $42 per barrel and $54 per barrel, though the average is likely on the lower end of that range.

Wood Mackenzie's analysis finds that most producers want to see output drop to push supply and demand dynamics back to a balance. No individual company, however, is eager to take the initiative on its own.


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