June 29 (UPI) -- Economists in Texas said the ability to do more with less in the energy sector is a source of optimism, but broader trade issues could present headwinds.
The Federal Reserve Bank of Dallas said in a quarterly report that oil and gas production increased for the third quarter in a row, but the pace of growth is slower than the last quarter.
Texas is the nation's top oil producer. The state reported a preliminary rate of crude oil production for March, the last full month for which it published data, at 2.49 million barrels per day, down from the 2.5 million bpd average recorded for the same time last year.
Growth in U.S. oil production is balancing against efforts by the Organization of Petroleum Exporting Countries to ease a supply overhang with managed output cuts. During the first quarter, the OPEC-led effort established a floor under crude oil prices of around $50 per barrel, though respondents to a Dallas Fed survey said they expected the U.S. benchmark for crude oil to hit about $48 per barrel by the end of the year.
That benchmark, West Texas Intermediate, was around $45 per barrel in overnight trading. Nevertheless, Rad Weaver, the head of an investment firm and a director at the San Antonio branch of the Dallas Fed, said there was a general sense of optimism among oil and gas companies in Texas.
"The main source of optimism is the innovation in Texas that has led to better- producing wells at less cost," he said. "With low energy prices over the past two years, service providers and well operators have been forced to become more efficient."
A forecast from the U.S. Energy Information Administration, however, shows the rate of oil production per well in the Permian shale basin is expected to decline about 2.5 percent from June to July.
On the broader economy, the Dallas Fed said the potential for President Donald Trump to renegotiate the North American Free Trade Agreement could cloud the outlook. With $231 billion in exports last year, Texas leads the nation and the bank said NAFTA has synchronized its economy with Mexico's.
"Mexico's industrial production follows U.S. industrial production," Jesus Canas, a co-author of the report, said in a statement.
