Fed: Oil Profitable At Lower Prices

Fed: Oil Profitable At Lower Prices

Oil producers in Texas and New Mexico can turn a profit when oil sells between $35 and $70 a barrel, with the average profit-point range being $51 a barrel.

The oil price crash that began in mid-2014 has had at least one positive effect: oil producers have become much more efficient and can make money even when oil prices are low.

According to the latest energy report from the Federal Reserve Bank of Kansas City, oil producers in Texas and New Mexico can turn a profit when oil sells between $35 and $70 a barrel, with the average profit-point range being $51 a barrel. That average profit-point price was down from $53 a barrel in the third quarter of 2016.

As of Friday, West Texas crude was selling for $53.18 a barrel.

Seductions

The Kansas City Fed also reported that “energy activity in the district [Missouri, Nebraska, Kansas, Oklahoma, Wyoming, Colorado and New Mexico] continued to expand solidly in the first quarter of 2017.”

That could be good news for New Mexico, whose state budget has been ravaged by the drop in oil prices over the past two years. About one-third of the state’s budget comes directly and indirectly from oil and gas revenues. The state has faced massive budget deficits, and the budge hasn’t grown.

But the state will likely faced reduced oil and gas revenues or years to come. The region’s producers predicted that expect oil prices to be $60 a barrel in two years, and $69 a barrel in five years.

New Mexico’s oil production reached a record high of 147.4 million barrels in 2015. That fell to 145.9 million barrels last year, according to the New Mexico Oil Conservation Division.

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Dennis Domrzalski is news editor of ABQ Free Press. Reach him at dennis@freeabq.com.

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Albuquerque’s definitive alternative newspaper publishing an inquisitive, modern approach to the news and entertainment stories that matter most to New Mexicans. ABQ Free Press’ fresh voice speaks to insightful and involved professionals who care deeply about our community.

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