The Odessa Economic Index remained in decline through March falling to 204.0 for the month, down from 207.0 in February, and down 11.5% from the March 2015 OEI of 230.5. Most components of the index continued to register predictable year-over-year declines in the first quarter with only new single-family housing permits and the average home sale price higher for the quarter compared to year-ago levels. The March 2016 Odessa Economic Index is down by 12.0% compared to the peak index of 231.9 achieved in January 2015.
An increase in the monthly average crude oil price from February to March slowed the rate of decline in the Texas Permian Basin Petroleum Index, which fell to 221.4 in March down from 224.1 in February, and down 37.8% from the March 2015 TPBPI of 342.8. The March posted West Texas Intermediate crude oil price averaged $34.58 in March compared to $27.08 in February. The March average price was still down by 22% compared to March of a year-ago, however, and 66% compared to the June 2014 monthly average in advance of the onset of price decline. The rig count, drilling permits, and regional oil & gas industry employment continued to decline, however, along with crude oil well completions and the regional oil & gas company stock index.
Production levels for both crude oil and natural gas remain above year-ago levels, though the margin of year-over-year increase is dwindling. Daily production is falling, but the pace of decline has been fairly modest thus far.
The Texas Permian Basin Petroleum Index serves as the leading index for the Odessa general economy and the economy of the Permian Basin; only a number of months after the regional oil & gas activity index troughs and begins to rise can we expect the general economy to do the same.
It was roughly six months after the peak in the Texas Permian Basin Petroleum Index that general spending per Odessa sales tax receipts began to decline, and in fact general real spending per first quarter 2015 sales tax figures was up by about 14% compared to the first quarter of the previous year. Indeed, taxable spending did not register a quarterly year-over-year decline until the third quarter 2015. Spending is dropping rapidly at this point, with the first quarter 2016 total down by 22% compared to the first quarter of a year ago. Spending per March sales tax receipts was down by about 26% compared to the March 2015 total.
Auto sales fell sharply in the first quarter with inflation-adjusted spending on new and used automobiles off by over 30% compared to the first quarter of 2015, which in turn was still up by about 4% compared to the first quarter of the previous year.
Construction activity remains relatively strong with the second straight year-over-year increase in real (inflation-adjusted) building permit valuations. The first quarter real building permit total, however, was down by about 9% compared to the first quarter 2015 total, which in turn was up by 21% compared to the first quarter of the prior year. Housing construction (new single-family residence permits) was higher for both the month and the first quarter compared to year-ago levels.
The number of existing home sales was down only modestly for the month and first quarter; the March monthly average price of those sales was down by 8.5% compared to a big number (over $200,000) in March of a year ago. The January and February price increases were significant, however, and the first quarter average home sale price was up by 3% compared to the first quarter of a year ago.
Close to 4,900 jobs were lost on average in the first quarter (year-over-year), a decline of 6.2% compared to the first quarter 2015 average employment level. March total payroll employment was down by 5.3% compared to the March 2015 estimate, reflecting the loss of some 4,100 jobs over that 12-month period of time. Of those 4,100 jobs lost, an estimated 2,500 were direct oil & gas jobs (production, oilfield services, and drilling).
Texas and US crude oil production are finally beginning to register the effects of the decline in crude oil prices, and again the pace of production decline should accelerate in 2016. The response in production appears to be providing at least some upside support to crude oil prices, and it is at least possible that the market bottom occurred in February 2016. The caveat, of course, is that we’ve seen a few ‘false positives’ along the way thus far and only time will tell if this price increase is the real deal. The posted price for West Texas Intermediate crude oil hit a low of $22.75 on February 11; on April 26, the posted WTI price exceeded $40/bbl for the first time since November 10, 2015 (when prices were on the way down). That is an increase of close to 80% - from a low number, admittedly – and that in turn is reason for some cautious optimism and celebration as it may represent the long-awaited light at the end of the tunnel.
Try not to become a person of success, but rather try
to become a person of value. ~Albert Einstein