Skip Navigation LinksMy Argus / News / News Story

Printer friendly

Oil, gas activity slows in 2Q: Dallas Fed

28 Jun 2017 17:39 (+01:00 GMT)
Oil, gas activity slows in 2Q: Dallas Fed

Houston, 28 June (Argus) — Oil and gas business activity slowed slightly in the second quarter and may drop further amid falling oil prices, the Federal Reserve Bank of Dallas said.

The business activity index — the broadest measure of conditions among Eleventh Federal District energy firms — fell to 37.3 from 41.8 in the first quarter, the bank said in its quarterly energy survey. Positive readings generally indicate expansion, while readings below zero point to contraction.

"The recent downturn in oil prices has made the outlook murkier for the industry," senior economist Michael Plante said. "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, but the pace of gains slowed, with the production index slowing to 10.2 in the second quarter from 13.1 in the previous three months. The natural gas production index declined by seven points to 10.6.

"This suggests oil and gas production is rising at a slower pace than last quarter," Plante said.

The survey may be among the first indicators of a start to a gradual slowdown in drilling activity in the US onshore shale industry. Another indication may have come from Hess, a key producer in the Bakken in North Dakota, that yesterday said it may hold off on adding more rigs in the region if current oil prices prevail. This could make Hess the first large US independent to announce a pause in its plans.

The bank last week published a separate monthly energy indicators report in which it said oil and gas employment and output continued to grow this spring.

On average, respondents to the survey expect Nymex WTI prices to be at $48.79/bl by year-end, with responses ranging from $30-$65/bl. WTI averaged $43.80/bl in the time the responses were collected.

The majority of respondents, 67pc, 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 were split on whether OPEC will continue to limit its oil production after March 2018. Of the total, 55pc said OPEC will continue to limit production after that date, while 45pc said OPEC will not.

The survey samples oil and gas companies headquartered in the Eleventh Federal Reserve District, covering Texas, southern New Mexico and northern Louisiana.

The bank collected the data from 14-22 June from 138 companies. Of the total, 70 were exploration and production companies and 68 were oilfield services providers.