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Dallas Fed Reserve Provides Optimistic Local Energy Outlook

Dallas Federal Reserve

The energy woes for one of the main oil producing areas of the United States may be a thing of the past, according to the latest quarterly report from the Dallas Federal Reserve.

The survey encompasses upstream energy firms located or headquartered in the Eleventh Federal Reserve District, which includes Texas, southern New Mexico, and a portion of Louisiana. It includes the Barnett Shale, Eagle Ford, Haynesville Shale, and the Permian Basin.

 

(Click to enlarge)

“Results suggest conditions were improving again in the third quarter,” Michael Plante, senior research economist and project manager for the latest Dallas Fed Energy Survey said in an interview the Midland Reporter-Telegram.

Nearly 62 percent of the 149 respondents to the survey believe that the price of oil, which has plummeted since 2014, will increase a year from now. At least 90 percent feel the West Texas Intermediate price must surpass the US$55 per barrel mark.

Most of those surveyed anticipate a notable increase in drilling activity, particularly in the second quarter of 2017.

A plurality of 48 percent of respondents from the report published on September 26th is also optimist over the price of natural gas.

Energy firms also reported a 25 percent spike in equipment utilization as well as a continued fall in the prices of services.

Despite the bright indicators, other factors were not so positive.

Production for oil and natural gas dropped for the third straight quarter, albeit a slower rate than previous periods. Jobs in the sector continued to be shed, while the employee indices for hours and wages plus benefits continued in the red.

“Based on the survey itself, (respondents) are saying the worst is over. But one thing I would point out, the comments told us there is uncertainty about recent price weakness and continued oversupply,” Plante said.

“The comments suggest people are still uncertain, but even if they’re uncertain, they think things will be better next year,” he added.

Aside from the energy industry, the Dallas Fed is also bullish over the manufacturing sector that has increased production during the month of September based on the results of another survey released on September 26th.

By Erwin Cifuentes for Oilprice.com

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