A bad quarter for oil, ugly times for Texas

[Van]

Oil prices fell Tuesday, partly on reports that Libya may be
able to boost oil imports slowed by factional fighting in Bir al-
Ghanam, above, and elsewhere in the North African nation.

Speculation that more Middle Eastern oil is headed to market
forced down prices again Tuesday, further pummeling a Texas
economy reeling from crude's downturn.

With the price falling for three consecutive quarters - the
longest losing streak since 2003 - the Lone Star State is
feeling the pinch as producers pare back.

Houston-based oil firm Sabine Oil & Gas Corp. on Tuesday warned
that it could default on $1.7 billion in debt after the plunging
prices left it strapped for cash.

Another Houston company, Frank's International, announced plans
to lay off 400 to 600 workers, joining a growing number of firms
that are shedding employees as they slash costs and rein in
spending. Four others notified the Texas Workforce Commission in
the past week of plans to cut more than 400 workers statewide.

And some Texas manufacturers blamed falling oil prices in part
for a slowdown at the state's factories as their oil and gas
customers shy away from placing new orders, according to a
survey conducted by the Federal Reserve Bank of Dallas.

Although the state's economy is much more diverse than it was
during the 1980s oil bust, the shale boom's swift downturn
proves that the Texas economy still relies heavily on oil and
gas.

"We're coming off that high," said Jesse Thompson, business
economist at the Federal Reserve Bank of Dallas.

U.S. benchmark West Texas Intermediate crude tumbled $1.08 to
$47.60 per barrel on the New York Mercantile Exchange Tuesday as
traders placed bets that Libya and Iran soon will unleash more
crude into an oversupplied market. International benchmark Brent
fell $1.18 to $55.11.

Negotiators trying to broker a nuclear deal with Iran pushed
back the Tuesday deadline to reach an accord that could ease
restrictions on Iranian oil exports at a time when swelling
global supplies are exceeding demand.

Libyan ports to reopen

Meanwhile, Elmabruk Bosaif, the head of Libya's national oil
company, said Tuesday that two of the country's biggest ports
will reopen soon after being closed for months because of
fighting between the government and forces backing a rival
administration, according to reports in Reuters. The ports can
handle 600,000 barrels per day, Reuters reported.

"Libyan oil production is increasing and with the potential
reopening of the ports, we could see even more light, sweet
crude oil enter into the market," said Andy Lipow of Houston
consulting firm Lipow Oil Associates.

The U.S. already is swimming in light oil since advances in
hydraulic fracturing and horizontal drilling unlocked vast
amounts of oil and gas from previously impenetrable shale rocks.

Government data due out Wednesday could show another rise in the
nation's commercial crude oil inventories, dealing another blow
to oil prices, Lipow said.

In Texas, more than 100 manufacturers surveyed by the Federal
Reserve Bank of Dallas expressed pessimism about broader
business conditions for the third month in a row. The production
index, a key indicator of the state's manufacturing conditions,
fell into negative territory in March for the first time in
nearly two years, pointing to a contraction in factory activity.

Reverberations felt

As oil cash dries up, so does the demand for new pipes, parts
and other goods manufactured in Texas for use in the oil patch,
factory executives indicated in their survey comments, which are
anonymous to foster candid responses.

"Our oil and gas customers have just stopped producing," one
executive from the fabricated metal manufacturing sector
responded. "This is not an unusual event for our oil and gas
customers, but what feels different about this time is no one
knows when production will restart. Typically we have to ride
out 60 to 90 days, and this one looks like six months or more."

When crude prices started sliding in the fall, executives
responding to the survey fretted the downturn could dampen
business, said Emily Kerr, business economist at the Federal
Reserve Bank of Dallas. "It wasn't until the past couple of
months that we've seen the comments turn from the prospective
impact to companies actually saying, 'This is impacting us,'"
she said.

Oil field employment continues to shrink along with prices.

Houston-based AFGlobal Corp., which provides manufacturing and
supply chain services, notified the Texas Workforce Commission
last week of plans to cut 89 workers in Houston. Tenaris, a
Luxembourg-based pipe and tube maker, said it will suspend
operations at its Conroe facility and lay off 230 workers there.

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quarter-for-oil-ugly-times-in-Texas-6171742.php