By Velda Addison, Hart Energy

Texas appears to be on track to break the state’s annual production record set in 1972 as July production reached more than an estimated 111 million barrels.

That is according to the Texas Alliance of Energy Producers, which said in a Sept. 8 news release that July’s oil output was 15% more than what was produced a year earlier. That would be great news for oil companies if the price per barrel had not plummeted. The alliance said that the value of crude produced in Texas fell by 44.3% to about $5.3 billion, with crude oil prices averaging $47.93/bbl, in July.

The price for a barrel of West Texas Intermediate crude has dropped from highs of more than $107/bbl in mid-June 2014 to about $45/bbl today, the result of too much oil and not enough demand. The imbalance has taken its toll on the coffers of oil and gas companies, which have been forced to cut back spending, lay off thousands of employees and look for ways to become more efficient in hopes of lower operational costs.

Efficiency gains are evident, especially considering production growth occurred as the number of active drilling rigs was more than chopped in half. Data from Baker Hughes Inc. showed the number of active drilling rigs in the state averaged 369 in July. The active rig count was 892 in July 2014.

But Texas’ producers defying low wellhead prices could be coming to a temporary halt.

Karr Ingham, the economist who created the Texas Petro Index, said that although oil production is growing, the margin of growth is getting smaller—a trend he thinks will continue.

“I still expect crude oil production statewide to peak sometime in the second half of 2015, perhaps even in the third quarter,” said Ingram, “but the question is will monthly crude oil production go negative compared to year-ago levels by year-end? Not by my calculations it won’t, and it looks like we are still on track in 2015 to eclipse the all-time Texas production level achieved in 1972.”

That could mean more troubling news when it comes to oil prices, given the market is still saturated worldwide.

“People are looking for reasons to change their thinking on oil prices, but market fundamentals simply do not point to higher crude prices,” Ingham said. “There might be some short-term ups and downs, but the substantial pressure on price simply has to be regarded as downward, not upward.

“Even if crude oil production peaks and begins to decline, it still has to go down far enough to begin to affect the broader supply-demand imbalance. A rapid drop-off in the second half of 2015 would be a solid move in that direction,” he added.

Time will tell whether that actually happens, and whether more companies—like EOG Resources for example—will leave wells uncompleted until market conditions improve. The company reported in August that it has not ramped up production. In all, crude oil and condensate production for EOG—which has both U.S. and international operations—fell slightly to 277.5 Mbbl/d for second-quarter 2015 from 281.3 Mbbl/d for the same time period in 2014. Gas volumes also fell to 1,257 MMcf/d from 1,383 MMcf/d.

At the time, EOG’s inventory of uncompleted wells was at about 320.

“Many of you are asking, ‘When will EOG grow oil again?’ ” CEO Bill Thomas said on a conference call Aug. 7. “We have said all along that we do not want to grow production until we see the oil market is firmly rebalancing. We will be watching supply-demand fundamentals in the second half of the year closely as we determine our plan for 2016.”

His logic is rational. In the meantime, everyone is still watching and waiting for this downturn to pass. The International Energy Agency predicts global oil demand in 2015 will increase by 1.6 million barrels per day.

Velda Addison can be reached at