The Odessa Economic Index posted another strong increase in November rising to 213.0 up from 210.1 in October (revised upward from the original October index of 210.0 due to an upward revision in October payroll employment), and up 12.8% from the November 2016 OEI of 188.9. Again, there is but one negative on the table of economic indicators and that is the monthly number of new single-family construction permits issued. Otherwise, all components of the index are sharply improved compared to year-ago levels and the Odessa general economy continues its impressive recovery.
The rate of recovery in the Texas Permian Basin Petroleum Index gained momentum in November as it posted its 14th straight monthly increase, rising to 278.5 for the month up from 271.3 in October, the largest month-to-month increase thus far in the current cycle of recovery and expansion. The November TPBPI is now over 31% higher compared to its year-ago level, but is still down by some 27% compared to its all-time peak of 381.5 achieved in November 2014.
Crude oil prices surged to their highest levels since mid-2015 (when prices were on the way down) with WTI posted prices averaging over $53 in November, a 27% year-over-year increase. The increases were largely based on improving global supply and demand balance metrics and the expectation that OPEC, et al would extend the production cuts through year-end 2018 – which in fact they did at the end of November.
The increase in crude oil prices reversed the minor decline in the rig count which improved to a monthly average of 321 in November (for RRC districts 7C, 8, and 8A), the highest since January 2015. That compares to a peak of 467 in November 2014 in advance of the deep and long industry contraction during which the monthly average rig count declined to a low of 121 in May 2016. The number of drilling permits issued across the region (also for 7C, 8, and 8A) in November surged to the highest monthly total since October 2014, posting a 91% year-over-year increase in the process.
The production data utilized in the Texas Permian Basin Petroleum Index is also the total of crude oil and natural gas production in those same three Railroad Commission districts; the US Energy Information Administration publishes production estimates for the full Permian Basin region including New Mexico, and those estimates suggest an unbelievable 2.7 million barrels per day in December, climbing to nearly 2.8 million barrels per day in January 2018. The Texas 7C/8/8A estimate – which may well be a conservative estimate – surpassed 1.9 million barrels per day in November for the first time (or at least the first time in a very long time, and in post-1970-80s production history).
Rapid increases in regional oil & gas activity and the resulting increases in industry spending and employment continue to swell general activity in the Odessa economy with some indicators already approaching or achieving record levels just 13 months into the recovery. General real (inflation-adjusted) taxable spending indeed soared to a new record both in the month of November (per November sales tax receipts) and for the year-to-date, surpassing the prior records set in November and year-to-date through November 2014.
Auto sales activity set a new November monthly record as well, logging a 51% increase compared to November of a year ago. The year-to-date total remains slightly behind the lofty numbers achieved through November 2014, but that gap is rapidly narrowing, and auto sales activity will almost certainly set new records by every measure in the early months of 2018.
The 1,193 closed home sales through the November is also the highest sales total recorded in the first eleven months of the year, and is up by nearly 20% compared to the January-November 2016 total. The average price of those sales declined by about 5.2% in 2016 but have rebounded in 2017, up by 4.5% in November and 5% for the year-to-date.
The employment estimates continue to suggest only modest employment growth (and that will be the case until the annual revisions are issued in a couple of months); again, however, it is a near certainty that employment growth is occurring at a much faster rate than the current numbers would suggest, and are therefore likely to be revised significantly upward when the revisions are released on March 9.