Oil and gas business activity continued to increase in the third quarter, but at a 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—fell from 37.3 in the second quarter to 27.3 in the third. Positive readings in the survey generally indicate expansion, while readings below zero generally indicate contraction.
“Activity levels in the oil and gas sector increased for the sixth quarter in a row, but the pace of growth slowed compared to the second quarter,” said Dallas Fed Senior Economist Michael D. Plante. “Oil prices continued to be depressed this quarter relative to the start of the year, and this has restrained growth in the sector.”
This quarter’s survey includes a series of special questions about the expected impact of Hurricane Harvey on the energy sector. A little more than half of responding oil and gas executives said the storm had a slight negative impact on their business; however, the majority of all respondents expect that their business will not be negatively affected six months from now.
“Respondents reported widespread but generally limited impacts on their operations due to Hurricane Harvey, and most believe these effects will be gone six months from now,” Plante said. “When asked about the broader energy sector—which includes refineries—many believe there will be some minor lingering effects six months from now.”
The special questions also asked respondents about their forecasts for U.S. production at the end of 2018. Responses were generally above current production levels, with about 30 percent of responses falling between 9.5 and 9.99 million barrels per day (mb/d) and 39 percent between 10 and 10.49 mb/d.
Other Survey Highlights:
Oil and gas production increased for the fourth quarter in a row, according to executives at exploration and production (E&P) firms. The oil production index rose from 10.2 in the second quarter to 19.3 in the third quarter. Likewise, the natural gas production index rose from 10.6 to 17.3.
Labor market indexes point to rising employment and employee hours, albeit at a slower pace than last quarter. Growth in employment was driven primarily by oilfield services firms. The employment index was 24.6 for services firms versus 5.2 for E&P firms.
The company outlook index posted a sixth consecutive positive reading and rose from 20.3 in the second quarter to 28.2 in the third quarter. The uncertainty index regarding the outlook plunged from 35.0 to 4.9. Only 22.5 percent of firms reported increased uncertainty about the future, down from 46.7 percent last quarter.
On average, respondents expect West Texas Intermediate (WTI) oil prices to be at $50.20 per barrel by year-end, with responses ranging from $40 to $63 per barrel. WTI spot prices averaged $49.91 per barrel during the survey collection period.
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 Sept. 13-21, and 143 energy firms responded to the survey. Of the respondents, 78 were exploration and production firms and 65 were oilfield services firms.
Next release: Dec. 28
(News release from the Federal Reserve Bank of Dallas)
