HOUSTON, March 3 (UPI) -- Oil price weakness is finally catching up with Texas oil producers and contraction is now expected throughout 2016, an industry economist said.
Oil field services company Baker Hughes estimates 305 rigs were active in Texas in January, down 60 percent from the previous year. Karr Ingham, an economist who created the Texas Petro Index, said last time markets were this weak, there were about 100,000 fewer jobs than the estimated 230,000 in the exploration and production sector for January.
Without any sort of meaningful recovery, he said in an emailed report that the "bloodletting in Texas' upstream oil and gas industry will continue as the year progresses."
The Texas Petro Index, a metric developed by Ingham to gauge the health of the sector, declined 40 percent from January 2015 to 181.9, lower than the weakest point during last decade's recession.
According to Ingham's count, Texas oil production in January was 2.3 percent less than last year. The price of crude oil, about $34.50 for West Texas Intermediate, means the value of Texas oil declined 36.8 percent to $2.92 billion in January.
"It is at least somewhat encouraging that estimated crude oil production in Texas actually posted a year-over-year decline in January," Ingham said. "Although the decline was modest, we can expect the pace of production decline in Texas and the U.S. to accelerate in 2016."
The Dallas Federal Reserve said earlier this year that low oil prices resulted in a deterioration of the financial position of many companies tied to the energy sector and was now spilling over into the manufacturing sector. Texas produces more than 11 percent of all the manufactured goods in the country, putting it in the No. 2 spot behind California.