Lower Prices Stop Energy Index Growth
A $4 decrease in crude oil prices and a 14 percent fall in natural gas prices stopped the upward trajectory of the Oklahoma Energy Index, putting an end to three consecutive months of index growth to close 2016.
Average spot crude oil prices fell from $49.78 to $45.71, and the monthly average for natural gas prices fell from $2.98 to $2.55. Those decreased prices sent the Energy Index, a measure of oil and natural gas industry activity, downward to 163.2 using data collected in November, a 1 percent decrease from the previous month’s reading of 164.5.
“Even though energy prices dipped in November, the overall factors in the Index show signs of stability,” said Chris Mostek, senior vice president of energy lending for Bank SNB. “These trends indicate the possibility of strengthening further in 2017.”
Despite the Index contraction, signs of hope remain for the state’s defining industry. Oil and natural gas industry employment held steady for the month and drilling activity in Oklahoma increased from 72 to 77 drilling rigs. Optimism for the oil and natural gas industry continues as prices further stabilize following the recent production cut agreement from OPEC and the election of what appears to be an energy-friendly president.
“Both the election and OPEC agreement seem to offer a temporary reprieve to excess uncertainty in energy markets,” said Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute. “Early proposed cabinet appointees indicate an easing of regulations and leasing bureaucracies that have frustrated industry activity while the OPEC agreement signals a lower bound price and consequent financial distress tolerable by principal OPEC members. Optimism is developing for a slight increase in global economic activity which, when coupled with production restraints, could find global oil markets rebalanced as early as the middle of 2017. As markets rebalance and onshore regulations and bureaucracies lessen, Oklahoma will be poised to benefit from its location central to several major low-cost oil plays.”
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.
Contact: Cody Bannister