Looking Ahead: Uncertainty Remains High for Texas Oil in 2021

Looking Ahead: Uncertainty Remains High for Texas Oil in 2021

Looking Ahead: Uncertainty Remains High for Texas Oil in 2021

2020 has been a year of uncertainty and no man, woman or child has been spared the impacts of the COVID-19 pandemic and economic shutdowns. And this rings true for the Texas oil and gas industry. Because we are deeply rooted in the oil business here at home, we like to stay on top of any new developments or trends that impact our customers, friends and neighbors. This is what we’ve found:

West Texas Oil Activity

Reduced economic activity and shutdowns have certainly had an impact in energy demand throughout Texas, further impacting oil prices. Whereas West Texas Intermediate crude oil prices were $56.99/ barrel in 2019, they were just $38.24/barrel as of a November 10, 2020 EIA report. As of November 25, prices are rising to over $42/ barrel. On the horizon, there appears to be an incremental increase going into 2021, with projected WTI crude oil barrel prices exceeding $44.

WTI Crude Oil Price and NYMEX confidence intervals

Source: EIA

Texas was the hardest hit regarding oilfield employment, losing 59,200 oilfield services jobs since the pandemic started, according to the Petroleum Equipment & Services Association.

Texas’ tough year in oil and gas continues with uncertainty about the coming year’s Federal policies on fuel production. The state accounts for 41% of the nation’s crude oil production and 25% of natural gas production (EIA).

The Texas rig count fell from 400 active rigs at the start of 2020 to just 133 in October. Texas crude oil production fell from a seven-year high of near 5.5 million barrels per day (bpd) to about 4.5 million bpd after the first quarter of 2020, but seems to be increasing slightly to 4.69 million bpd in August (Federal Reserve Bank of Dallas). However, Texas is far from out of the woods.

Short-Term U.S Energy Outlook

The U.S. Energy Information Administration (EIA)’s Short-Term Energy Outlook report from November forecasts continued changes in energy demand and supply patterns and notes that the U.S. gross domestic product (GDP) declined by 4.4% in the first half of 2020 compared to the same time the year prior. They do expect GDP to grow by 3.7% from 2020 to 2021 (EIA).

In addition to impacts brought on by coronavirus, an active tropical storm and hurricane season has caused evacuations and well shutdowns in the Gulf Coast. The U.S. Energy Information Administration anticipates global consumption of liquid and petroleum fuel to continue falling in coming months (EIA). U.S. oil and gas employment also fell in 2020 with support activities for oil and gas operations dropping to 178,400 from near 300,000 in 2019.

Oil & Gas Industry: Looking Ahead to 2021

America is the world’s leading producer of oil and natural gas, providing 80% of U.S. energy, employing millions of Americans, ensuring our energy security, and pumping hundreds of billions of dollars into new American manufacturing (U.S. Department of Energy).

So, what can we expect for Texas and beyond? While Texans are used to the boom and bust of the oil markets, they may have to prepare for another turbulent year ahead. In an October article published in World Oil, Deloitte predicts 30% of those lost oilfield jobs won’t return until late 2021 and that is only if oil prices rise to their anticipated $44 per barrel.

Related: Wrapping Up 2019: West Texas Oil Economy in Review

Stay in the know with us. Keep on the lookout for future articles discussing both the local economy here in Texas, as well as what’s happening in the world. We would love to hear your insight and how you are impacted by our regional and global oil industry.

We are your cutting tools specialists and are committed to helping you remain profitable and productive in a changing world. Have questions? Reach out to us by visiting our website or calling one of our four Texas locations.

Odessa: 800-592-4516

Lubbock: 806-765-8461

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Ft. Worth: 682-841-1700

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