U.S. crude oil prices could move close to $60 by the end of the year, but rig counts in Texas could stall, the Federal Reserve Bank of Dallas reported.

West Texas Intermediate, the U.S. benchmark for the price of oil, was trading at around $48.60 per barrel early Friday, a downturn from its recent high-water mark above $50 per barrel. Crude oil prices have improved considerably over last year, but remain well below the levels from three years ago, when oil was holding above $100 per barrel.

Respondents reporting to the Dallas Fed said they expected WTI to range between $45 per barrel and $59 per barrel by the end of the year. The report said that's "in line with the WTI price range needed to profitably drill a new well."

A report from global consulting firm McKinsey & Co. found that, under a scenario where WTI moves above $60 from 2019, output from the Permian shale basin in Texas, one of the more lucrative reservoirs in the country, could drive about 20 percent of the growth in exploration through 2021, in part because efficiency has improved.

McKinsey & Co. forecast a break-even price for Permian operations at around $41 per barrel this year. A July forecast from the U.S. Energy Information Administration put the average price for WTI at $49 per barrel for 2017 and $50 per barrel for next year.

The improvement in oil prices from last year has led to increased exploration and production. Gauged by rig counts, the Dallas Fed said activity nearly tripled from May 2016 lows, but has held more or less steady during the second quarter. Fed contacts said the pace of increase, however, might not be sustainable and could drop off in the second half of the year.

"This is consistent with the Dallas Fed's latest Energy Survey, which showed that business activity grew robustly in the second quarter, albeit at a slower pace than in the first quarter," the bank's report read.

Elsewhere, the survey found employment related to the oil and gas sector grew at its fastest rate in the second quarter, with an annualized growth rate of 25.8 percent. Overall, employment prospects for Texas are good, but the Dallas Fed said it had concerns about some of the economic policies embraced by U.S. President Donald Trump and efforts by Congress by overhaul the tax program.

"The main risk factors going into the second half of the year continue to be a sharp decline in energy prices and uncertainty regarding trade and tax policy," it said.

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