Oil and gas activity edges higher as outlooks brighten, says Dallas Fed
Activity in the oil and gas sector increased slightly in fourth quarter 2024, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index, the survey’s broadest measure of the conditions energy firms face in the Eleventh District, increased from -5.9 in the third quarter to 6.0 in the fourth quarter.
The company outlook index turned positive in the fourth quarter, increasing 19 points from -12.1 to 7.1, suggesting mild optimism among firms. The outlook uncertainty index declined 26 points to 22.4.
Oil and gas production was mixed in the fourth quarter, according to executives at exploration and production (E&P) firms. The oil production index remained positive but declined from 7.9 in the third quarter to 1.1 in the fourth quarter, suggesting oil production was relatively unchanged during the period. Meanwhile, the natural gas production index remained in negative territory but lifted from -13.3 to -3.5, indicating gas production edged lower.
Costs rose at a similar pace when compared with the prior quarter. Among oilfield services firms, the input cost index was relatively unchanged at 23.9. Among E&P firms, the finding and development costs index was relatively unchanged at 11.5. Meanwhile, the lease operating expenses index increased slightly, from 21.3 to 25.6.
On average, respondents expect a West Texas Intermediate (WTI) oil price of $71 per barrel at year-end 2025; responses ranged from $53 to $100 per barrel. When asked about longer-term expectations, respondents on average expect a WTI oil price of $74 per barrel two years from now and $80 per barrel five years from now. Survey participants anticipate a Henry Hub natural gas price of $3.19 per million British thermal units (MMBtu) at year-end 2025.
When asked about longer-term expectations, respondents on average anticipate a Henry Hub gas price of $3.63 per MMBtu two years from now and $4.16 per MMBtu five years from now. For reference, WTI spot prices averaged $70.66 per barrel during the survey collection period, and Henry Hub spot prices averaged $3.04 per MMBtu.
