Energy Index Shows Summer Recovery
Stabilizing crude oil prices and the start of the summer driving season should give a boost to Oklahoma’s oil and natural gas industry according to the most recent Bank SNB Oklahoma Energy Index (OEI).
The index of oil and natural gas industry activity fell to 218.77 using data collected in May, a 1.6 percent decrease from the previous month’s reading and 16.8 percent below May 2015 levels.
However, oil prices continue to recover, rising nearly 9 percent from the month before to average $59.26 for the month. Oil prices remain 42 percent below the same period last year, but have managed to hold at or above the $55 level for the spring period. The summer driving season combined with improving global economic conditions should keep modest upward pressure on prices through the summer season.
“Despite a drop in the Index compared to last month, the rate of decline is slowing,” said Chris Mostek, senior vice president of energy lending for Bank SNB. “Last month, pricing was a positive indicator, but we are now seeing improvement in other components as well. We remain optimistic that – though it might be slow – a recovery is under way for Oklahoma’s energy industry."
The two largest index components – oil and gas employment and support activities employment – both contracted in May, with the industry shedding an estimated 1,100 jobs, 300 of which were from the support (largely drilling and services) sector. While total industry employment is now well below last year’s level, the same is not true in the support subsector, as current estimates place mining support employment 400 jobs ahead of last May.
“This suggests drilling and service companies are releasing employees at a slower pace than they hired employees during the boom,” said Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute. “This pattern may provide insight into the expectations of operators as they look for modest recovery in prices to continue with new drilling contracts to follow.”
The Energy Index is a comprehensive measure of the state’s oil and natural gas production economy established to track industry growth rates and cycles in one of the country’s most active and vibrant energy-producing states. The OEI is a joint project of the Oklahoma Independent Petroleum Association (OIPA), Bank SNB and the Steven C. Agee Economic Research and Policy Institute.
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