The pace of expansion in the oil and gas sector slowed in the third quarter amid continued cost and supply chain headwinds, dampening outlook and fueling uncertainty regarding future growth, according to a survey released Wednesday by the Federal Reserve Bank of Dallas.
The Dallas Fed Energy Survey's business activity index fell to 46 in the third quarter from the prior quarter's record 57.7 reading.
This suggests the pace of the expansion decelerated slightly but remains solid.
-the Fed branch said
Executives at exploration and production firms surveyed reported that the oil production index in the third quarter edged lower to 31.7 from 32.6 in the prior three-month period, while natural-gas output rose to 35.6 from 35.3.
Costs increased for a seventh straight quarter, with the indexes near historical highs. The supplier delivery time index fell to 28.4 from 31.9, indicating it is taking longer for firms to receive materials and equipment.
-the Fed said
All labor market indexes in the third quarter remained elevated, with the employment index reaching a record 30, up from 22.6 in the previous quarter, results showed.
The survey's company outlook index plunged to 33.1 from 65.9, while the uncertainty index surged to 35.7 from 12.4.
The data suggesting uncertainty became much more pronounced this quarter, especially among (exploration and production) firms.
-the Fed said
Firms now expect the benchmark West Texas Intermediate crude oil price to reach $88.74 per barrel on average by the end of 2022, down from the $107.93 projected in the previous quarter, with responses ranging from $65 to $122, according to the survey.
Eighty-five percent of respondents expect a "significant tightening" of the oil market by the end of 2024, while 79% expect "some" financial investors to return to the oil and gas sector and 11% expect "many" to return. Ten percent of executives don't expect investors to return to the sector, the survey showed.
Sixty-nine percent expect that the age of inexpensive US natural gas will end by the end of 2025, a further 12% expect it to happen by the end of 2030, while 3% expect it to occur after 2030.
The survey covered 163 energy firms, consisting of 105 exploration and production firms and 58 oilfield services firms, with the data collected from Sept. 14-22.