Crude oil production in the United States grew faster during the first quarter of the year, the Dallas Fed reported in its quarterly industry survey, noting that costs also increased.
Price sentiment in the industry was guardedly bullish, with a majority of respondents in the survey expecting West Texas Intermediate to end 2022 at between $80 and $90 per barrel. A much smaller portion—about 5 percent—expected WTI to end 2022 at between $110 and $120. Interestingly, a bigger portion of respondents believed the U.S. benchmark could end the year at more than $120 per barrel.
Another interesting outtake from the survey is the biggest portion of respondents in the survey, at 41 percent, believe a WTI price of between $80 and $100 is sufficient for more producers to switch to production growth mode. While the Dallas Fed’s own data supports this, based on reactions from the Biden administration, production has not been growing anywhere near fast enough.
However, it’s worth noting that about 30 percent of the respondents in the survey said that production growth plans were not dependent on oil prices. According to 59 percent, the main reason for production restraint was investor pressure to maintain capital discipline.
Among the other reasons motivating a cautious approach to production growth, respondents cited workforce shortages, limited availability of equipment, supply chain disruptions, and social, environmental, and governance issues.
The Dallas Fed’s crude oil production index shot up to a reading of 45 in the first quarter of 2022, from 19.1 in the fourth quarter of 2021. The natural gas production index jumped to 40 from 14 in the period.
Costs, meanwhile, rose to a record reading of 77.1, from 69.8 in the fourth quarter of 2021. Oilfield services costs have been rising for five consecutive quarters, the Dallas Fed reported.
By Irina Slav for Oilprice.com
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