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Texas oil producers primed to benefit from OPEC cuts, economist says

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Texas oil producers primed to benefit from OPEC cuts, economist says

Buoyed by higher oil prices and OPEC's decision to keep production cuts in place through 2018, Texas oil and gas production is on an upward trajectory.

The Texas Petro Index, which gauges oil and gas activity in the state, moved upward for the 11th consecutive month in October, to 183.2. Economist Karr Ingham created the index, which started at 100 in 1995, for the Texas Alliance of Energy Producers. It reached a high of 313.5 in November 2014, just as the force of the oil and gas price collapse began to be felt.

Ingham said the moves made by OPEC and other producers directly benefited their counterparts in Texas.

"[T]he decision by OPEC and other big oil exporting countries to hold the line on production cuts through year-end 2018 helped crude oil prices break out of the $45-per-barrel range, where they had been stuck for several months, to average more than $48/bbl in October and to reach $51/bbl by the month's end," Ingham said in a statement. "Overall, crude oil markets have generally tightened in recent months because of those cuts, so any other decision probably would have lowered crude prices."

Ingham said employment in the state's upstream oil and gas sector, which endured a brutal contraction during the price downturn, has increased by nearly 35,000 workers over the past 13 months. If OPEC holds true to its word and Texas producers move to fill the void left by their production cuts, the employment numbers should keep moving up.

"After stalling out and declining a bit since July, the statewide rig count rebounded in the last week of October in response to rising oil prices, and it has been on the rise ever since," Ingham said. "After dropping off in September, the number of drilling permits issued improved slightly in October, and permit numbers very likely will continue to improve in the coming months. Crude oil production generally is on the rise in Texas and production will continue to increase in Texas and the U.S. thanks to buyers that have posted West Texas Intermediate prices well north of $50/bbl."