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Dallas Fed Energy Survey: Oil and Gas Expansion Continues, but Energy Executives See Rising Uncertainty

Majority of executives believe oil market will come into balance in 2018 or sooner, but they’re split on OPEC maintaining production limits

For Immediate Release: June 28, 2017

DALLAS—Oil and gas business activity continued to increase in the second quarter, albeit at a slightly slower pace, according to executives responding to the quarterly Federal Reserve Bank of Dallas Energy Survey.

The business activity index—the survey’s broadest measure of conditions among Eleventh Federal Reserve District energy firms—remained robust at 37.3, slightly below the 41.8 reading last quarter. Positive readings in the survey generally indicate expansion, while readings below zero generally indicate contraction.

“Business activity levels in the oil and gas sector continued to expand this quarter, particularly among support service firms,” said Dallas Fed Senior Economist Michael D. Plante. “With that being said, the recent downturn in oil prices has made the outlook murkier for the industry. With many forward–looking indicators softening this quarter compared to last, it is possible that activity levels could grow at a slower pace in the coming quarter.”

Oil and gas production increased for the third quarter in a row, according to executives at exploration and production firms. The oil production index was 10.2, down from 13.1 last quarter, and the natural gas production index declined seven points to 10.6. This suggests oil and gas production is rising at a slower pace than last quarter.

The company outlook index posted a fifth consecutive positive reading but fell 25 points to 20.3. Uncertainty regarding the outlook rose again. Over 46 percent of firms reported increased uncertainty about the future, up from 33.8 percent last quarter.

On average, respondents expect West Texas Intermediate (WTI) oil prices to climb to $48.79 per barrel by year-end, with responses ranging from $30 to $65 per barrel. WTI spot prices averaged $43.80 per barrel during the survey collection period.

In a series of special questions focused on recent oil market developments, the majority of respondents—67 percent—said they expect the oil market to come into balance in 2018 or sooner, with a third saying it will be 2019 or beyond.

Oil and gas executives responding to the special questions were split on whether OPEC will continue to limit its oil production after March 2018. Fifty-five percent of executives said OPEC will continue to limit production after that date, while 45 percent said OPEC will not. In addition, respondents believe OPEC crude oil production will average 32.3 million barrels per day in the second half of 2017.

The survey samples oil and gas companies headquartered in the Eleventh Federal Reserve District—Texas, southern New Mexico and northern Louisiana. Many have national and global operations.

Data were collected June 14–22, and 138 energy firms responded to the survey. Of the respondents, 70 were E&P firms and 68 were oilfield services firms.

Next release: Sept. 27


Media contact:
Alex Johnson
Federal Reserve Bank of Dallas
Phone: (214) 922-5288