U.S. oilfield activity slipped in second quarter – Dallas Fed July 23, 2023 – Posted in: Communications, Video Conferencing – Tags:

By Arathy Somasekhar and Erwin Seba

HOUSTON, June 22 (Reuters) – Oilfield activity slowed further this quarter, according to the latest survey of energy executives by the Federal Reserve Bank of Dallas, with declines in oil production and gas output indices.

The overall business activity index, a broad measure of conditions, fell to zero in the second quarter from 2.1 in the previous quarter, the survey of oil and gas executives in Texas, Louisiana and New Mexico released on Thursday showed.

U.S.oilfield executives polled this quarter expect crude oil and natural gas prices to continue rising through the end of this year. Rising oil and natural gas prices play a role in inflation, which the Fed has been attempting to bring down by increasing interest rates.

A poll of energy executives at 152 firms found they expect U.S.crude oil prices to reach by year-end about $77 a barrel and natural gas at $2.97 per million British thermal units (mmBtu). U.S. oil futures were trading at $70.50 a barrel and gas at $2.55 per mmBtu on Thursday.

“Oil prices seem to be trading like a financial instrument terrified of this pending recession instead of paying attention to supply-and-demand fundamentals, which are pointing to pretty strong draws headed our way,” said one unnamed executive quoted in the survey.

Firms reported rising costs for a 10th consecutive quarter, بول ماشین but the rate of increase slowed.At oilfield services firms, the input cost index fell to 41.2 from 61.6 in the prior quarter. The index for exploration companies’ finding and development costs fell to 14.9 from 46.8.

“Margins have been squeezed to the point that it is hard to commit to new projects,” said one executive in the survey.”All of the uncertain economic projections give no confidence as to what is going to happen,” that executive added. (Reporting by Arathy Somasekhar in Houston; editing by David Evans)