Dec. 29 (UPI) -- The energy sector in Texas is leaving 2017 on a high note, though oil prices will need to be higher than expected for strong rig counts, a bank survey found.
A survey of 134 energy firms from Dec. 13-21 by the Federal Reserve Bank of Dallas showed an index measuring confidence had its first sign of reduced uncertainty since the first quarter of 2017. Most of that optimism came from drilling services companies, those that were hit hard by the market downturn in early 2016.
Michael D. Plante, a senior economist at the Dallas Fed, said the exploration and production side of the industry had a notable change in sentiment in the December survey.
"The energy sector is going into 2018 on a positive note," he said in emailed comments. "Growth in activity rebounded a bit relative to last quarter, outlooks improved greatly and there was a modest decline in uncertainty about the future."
State results for October, the last full month for which data are available, show a preliminary rate of oil production of 2.44 million barrels per day, up 2.8 percent from the same time last year. For natural gas, the average of 17.4 million cubic feet per day produced in October was down 7 percent from last year.
Rig counts, which serve as a loose gauge of confidence in the exploration and production sector, show 456 in Texas for December, according to Baker Hughes. That's up 47 percent from last year. Just over half, 51 percent, of the respondents told the Dallas Fed they expected the rig count to be higher than it is right now in six months.
"Oil prices appear to be high enough to support some additional drilling in 2018, but not high enough to significantly boost activity just yet," Plante said. "A little more than half of respondents think the rig count will be higher six months from now but almost all respondents think West Texas Intermediate crude prices need to be more than $60 to see a substantial increase in the oil rig count."
Respondents said they expected WTI to be around $58.98 per barrel by the end of 2018 on average. In pre-market trading Friday, WTI is a few cents over $60 per barrel.
Last month, Dallas Fed Assistant Economist Amy Jordan said the market is tightening up and there might not be too much room left for further economic growth.