By Collin Eaton / Houston Chronicle
Oil workers drilling for oil on rig near College Station, Tuesday, May 9, 2017. ( Marie D. De Jesus / Houston Chronicle )
The Texas economy is expected gain more momentum this year and add hundreds of thousands of jobs as the energy and manufacturing sectors rebound amid higher oil prices, according to a forecast by the Federal Reserve Bank of Dallas.
The forecast, released Tuesday, coincided with another jump in crude prices to nearly $63 a barrel amid growing optimism in energy markets that supplies are tightening after a three-year oil glut. The Energy Department, meanwhile, predicted that U.S. oil production, centered in West Texas, will soon exceed 10 million barrels a day for the first time ever as energy demand reaches record levels.
"The Texas economy is firing on all cylinders going into 2018," said Dallas Fed senior economist Keith Phillips.
The state's economy is forecast to grow 3 percent this year, accelerating from 2.5 percent in 2017, and add some 366,000 jobs, up from an estimated 306,000 jobs in 2017, according to the Dallas Fed. In Houston, economic growth also is expected to accelerate, with the metropolitan area projected to add some 75,000 jobs in 2018 if crude prices stay above $60 a barrel.
The state and local economies have picked up speed in recent months as the region began rebuilding from Hurricane Harvey and oil prices climbed toward $60 a barrel from their June low of about $43 a barrel. The state unemployment rate fell to a record low of 3.8 percent in November; in Houston, unemployment slid to 4.3 percent, down nearly a percentage point from the 5.2 percent the previous year, according to the Labor Department.
The key factor in the state's improving outlook has been the recovery of its most important industry, energy, after the brutal oil bust that began more than three years ago. Texas drillers have steadily put more rigs into operation over the past year, increasing the state's rig count by nearly 40 percent to 454, according to the Houston oil field services company Baker Hughes.
Crude on Tuesday gained 2 percent, settling at $62.96 a barrel in New York - its highest close in more than three years - amid signs that OPEC is largely sticking to its production cuts and global supplies are tightening. In the United States, commercial crude inventories are down more than 100 million barrels from their peak in March, as the expanding economy lifts income, industrial production and energy consumption.
The Energy Department on Tuesday projected that U.S. gasoline demand will average a record 9.3 million barrels a day in 2018, up about 30,000 barrels a day from 2017. Analysts, meanwhile, expect the Energy Department to report further declines in crude stockpiles on Wednesday.
"Virtually everything is moving in the right direction," said Karr Ingham, an Amarillo economist who studies the Texas oil industry. "Sixty-three dollar oil means a higher rig count. It means more oil and gas employees added to payrolls, higher spending on development and stronger overall economic activity in Texas in 2018."
The Energy Department projects that U.S. crude production, led by the Permian Basin in West Texas, will climb above 10 million barrels a day in the first quarter of this year, nine months earlier than previously anticipated. Over the year, oil output will average nearly 10.3 million barrels a day in 2018, up 980,000 barrels a day from 2017 and well above the previous record of 9.6 million barrels a day set in 1970.
In 2019, average daily production could grow to about 11 million barrels, according the Energy Department's projections.
The Energy Department also boosted its forecast of oil prices; it said it expects U.S. oil prices to average $54.01 a barrel in the first quarter of 2018, up from its previous forecast of $51.79 a barrel. In the fourth quarter, it said, prices could average $57.31 a barrel - up from its last projection of $54.95 a barrel.
David Hunn contributedto this report.
"If oil prices remain above $40 per barrel," Phillips said in a statement, "Texas likely will see continued broad-based growth across regions and sectors."