Dallas Fed survey: Oil and gas activity decreased in Q2 due to higher US steel tariffs
The Dallas Fed survey released on Wednesday showed that activity in the U.S. Oil and Gas sector in Texas and Louisiana, and New Mexico, decreased slightly in the second half of 2025. This was due to the increase in steel tariffs. The drop in activity comes after U.S. president Donald Trump, who encouraged U.S. manufacturers to "drill baby drill", doubled tariffs for steel and aluminum imports from 25% to 50%. About a quarter (25%) of the steel and aluminum used in America is imported.
Investors experienced significant volatility during the second quarter. U.S. Crude Futures dropped to a 4-year low of just $57.13 a bar on May 5, and then rose to $75.14 a barrel by June 18, which was the highest since January.
Dallas Fed survey shows that oil and gas production dropped slightly in the last quarter as prices fell.
Nearly half of executives surveyed said they expected to drill fewer oil wells in 2025 compared to what they had planned at the beginning of the year. A quarter of respondents also predicted that the number of wells drilled would decrease significantly.
27 percent of companies said that the recent increase in U.S. Steel Import Tariffs from 25% to 50% will result in them drilling slightly less wells.
An executive in exploration and production said, "It is hard to imagine what worse policies and D.C. rhetoric could have been for U.S. companies." The administration promised a better environment to producers, but delivered a world which benefited OPEC at the expense of the domestic industry. This year, the Organization of the Petroleum Exporting Countries (OPEC) and its allies made a radical policy change. They increased production to try to gain market share following several years of production reductions.
Another executive stated that "the Liberation Day chaos, and the tariff antics, have hurt the domestic energy sector." With this level of volatility, "Drill baby, drill" will not be possible. Companies will continue to build rigs and frack spreadings. The results from the Dallas Fed are in contrast to recent data released by Energy Information Administration. The EIA released data on Monday that showed U.S. crude production reached a record 13,47 million barrels of oil per day in April. This is up from the previous 13.45 million barrels bpd.
A LONG DOWNTURN
The survey found that costs among oilfield services firms increased at a faster rate in the second quarter than they did in the first.
An executive from an oilfield services firm noted that the rising costs of steel and aluminum tariffs is being passed onto customers.
Over half of the executives expect a slight drop in customer demand for oilfield services over the next 12 months as steel import tariffs are set to impact demand.
An executive of an oilfield services firm said that "the numerous negative tailwinds - tariffs, the oversupply and confusion surrounding economic policies - will have a significant impact on our domestic energy sector." "A prolonged downturn is the logical result."
Companies predicted a West Texas Intermediate crude oil price of $68 per barrel by year's end 2025 and a Henry hub natural gas price at $3.66 for every million British Thermal Units.
The data was collected between June 18 and 26. The respondents were 91 exploration and production companies and 45 oilfield service firms. (Reporting and editing by Stephanie Kelly, Matthew Lewis, and Georga McCartney from Houston)
(source: Reuters)
