Oilfield executives sour in Dallas Fed survey
According to a Federal Reserve Bank of Dallas survey published on Wednesday, oil and gas production in Texas, Louisiana, and New Mexico, the three states that produce the most, declined in the third-quarter as executives expressed a more negative outlook. The decline in oil and gas activity is due to the uncertainty surrounding oil prices, as well as increased frustration towards President Donald Trump and his administration. The executives blamed Trump policies such as tariffs, and his promise to lower oil price, for the decline in activity. Over a third (35%) of executives in exploration and production reported delaying their investment decisions due to increased uncertainty over the price of crude oil and cost of producing it. Oilfield services executives also expressed a gloomy outlook.
A vibrant oilfield service sector is crucial if the U.S. wants to increase production. In the anonymous comments section, an oilfield executive stated that "right now we are bleeding". For many producers, prices of $65 per barrel are needed to make a profit. According to LSEG, U.S. crude oil futures ranged from a high at $70 a barge to a low around $62 in the third-quarter.
The uncertainty caused by the policies of the current administration has dampened all investment in oilpatch. Another E&P executive stated that those who are able to do so were running away. Prices have been supported by geopolitical tensions between the Middle East, Europe, and the United States. However, OPEC+ has increased its production ahead of schedule as well as President Donald Trump’s tariff policies.
Drillers look around
More companies are looking at opportunities overseas as the best resources are drilled in the United States. In the next 10 year, more than three quarters of executives expect that shale drilling will become economically viable outside the United States. In March, the Turkish National Oil Company TPAO and U.S. oil giant Continental Resources signed a joint-venture agreement to develop shale oil fields in Turkey's Diyarbakir Basin. Houston-based EOG Resources also entered the upstream sector in Bahrain and the United Arab Emirates earlier this year.
An executive stated that "we have entered the twilight phase of shale", adding that "the U.S. doesn't run out of oil but it sure is running low on $60 per barrel of oil."
About 43% of E&P companies expect to see a decline in capital expenditures in the third quarter this year, compared to the same quarter last year. Oilfield services firms are anticipating a 42% decrease over the same period.
An E&P executive stated that the administration wants to see crude oil at $40 per barrel. With tariffs on imported tubular goods, prices have risen and drilling will disappear.
Companies anticipate a West Texas Intermediate crude oil price of $63 a barrel and a Henry hub natural gas price at $3.30 per 100,000 British thermal units by year's end 2025.
The survey was conducted between September 10 and 18. 93 of the respondents were oilfield service firms, and 46 were exploration and production companies. (Reporting and editing by Mark Porter, Will Dunham Liz Hampton, Nia Williams, and Georgina McCartney, in Houston)
(source: Reuters)
