US oil and gas activity increased in the third quarter even as firms grappled with ongoing price volatility linked to the Mideast conflict, according to a closely-watched energy survey from the Federal Reserve Bank of Dallas.
The business activity index — the survey's broadest measure of conditions — remained positive but slipped slightly to 38.8 in the third quarter from 46.1 in the second, suggesting the pace of expansion slowed slightly. The survey was conducted between 16–24 September.
"Many executives continue to see effects from the disruption to global supply and expect them to persist for some time," said Michael Plante, an assistant vice president at the Dallas Fed.
Executives from exploration and production (E&P) companies said wild swings in oil prices due to the US-Iran war were making it hard to plan ahead. "It is very challenging to select a planning price or budgeting price," said one executive in the anonymous survey. "Instability will be the word for energy markets with no end in sight until the oil delivery stabilizes in the Middle East," wrote another.
Survey respondents expect crude oil exports from the Mideast Gulf will take some time to return to normal levels following disruptions caused by the war. The most popular answer among respondents was by the second quarter of next year, followed by 2028 or later.
Meanwhile, executives expect it will take more than a year for the spread between fuel and crude oil prices to return to 2025 levels. Almost half anticipate it will take diesel prices more than four quarters, compared with 36pc who expect the same for gasoline.
Outlooks diverged in the latest survey, with producers remaining more positive than services firms. At the same time, E&P firms reported a higher uncertainty reading than services companies.
Meanwhile, cost pressures remained at elevated levels across the energy sector, and companies reported longer supplier delivery times. "It could be that what is somewhat limiting the increase in activity is just the unavailability or the constraints of trying to get more and more goods to the oil field, getting more and more labor, getting more and more rigs," said the bank's senior business economist, Kunal Patel.
The survey was carried out with firms operating in the Federal Reserve's 11th District which includes Texas, northern Louisiana and southern New Mexico. Of the 125 companies that took part, 83 were E&P firms and 42 were oilfield services firms.
US benchmark crude WTI was expected to end 2026 at $88/bl, according to the average of survey responses, which ranged from $70-$126/bl. Respondents forecast Henry Hub natural gas prices ending this year at $3.29/mmBtu on average. WTI spot prices averaged $98.70/bl during the survey period, and Henry Hub prices averaged $2.97/mmBtu.
