There’s been a lot of speculation recently that lower oil prices should impact production. Potentially setting up the market for a rebound.
And statistics released this week now seem to confirm that trend — in one of the largest producing regions in the U.S.
State regulator Railroad Commission of Texas just released data for production rates in January. Showing that output of both oil and gas took one of the most sizeable monthly declines in recent memory.
Oil output during January fell 11%, or 8.5 million barrels, as compared to the previous month.
Natural gas production was also down month-on-month — falling 8%, or 43 billion cubic feet. And condensate production dropped 10%, or 1.2 million barrels.
As the chart below shows, this is a decided break lower for the production trend for Texas. Basically erasing all of the gains in production seen over the past year.
Source: Railroad Commission of Texas
The scale of the monthly decline is notable — being much deeper than during any of the previous months since oil began its decline last summer. Up until now, oil output had been largely holding steady.
But that’s all changed. Potentially signalling that drilling activity may have pulled back to a point that can no longer make up for natural declines from existing wells. Indeed, the Railroad Commission reported that February saw just 1,521 new oil wells completed in Texas — a 45% drop from the 2,768 oil wells drilled during February 2014.
If this trend does hold, it could be a signal that lower prices are finally having an impact on supply. Watch for stats from the Railroad Commission next month to see if the pattern continues.
Here’s to making a dent,
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