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Business activity in the U.S. oil and gas sector slowed down considerably in the fourth quarter of the year as benchmark oil prices plunged by over a quarter, the latest quarterly Dallas Fed Energy Survey revealed.
While the business activity index of the Dallas Fed for the industry remained positive, the authors of the survey noted it nosedived from a reading of 43.3 in the third quarter to just 2.3. Though the decline looks substantial, it merely indicated that there has been hardly any real growth in business activity over the three-month period, after ten quarters of rising activity in a row.
In production, however, things looked up, with it growing for the ninth quarter in a row, the Dallas Fed also said, but growth slowed down with the oil production index declining from 34.8 in the third quarter to 29.1 in the fourth, and the gas production index falling from 35.5 to 24.8 over the three-month period.
The survey that the Dallas Fed conducts on a quarterly basis polls executives from the exploration and production industry who seem to be guardedly optimistic about the future. On average, respondents in the survey expected West Texas Intermediate to sell for US$59.97 a barrel this year, with the range of predictions between US$45 and US$80 a barrel.
In terms of company performance, however, the respondents were not so optimistic overall. The index for that metric, the Dallas Fed said, fell 57 points into negative territory, reading -10.2 as of December 31. The outlook is worst for the oilfield services sector, which is hardly a surprise: the sector has had a more uphill battle than the upstream in shaking off the effects of the 2014 price collapse.
Uncertainty about the future was also on the rise in the fourth quarter of 2018, another expected finding amid the persistent price decline and doubts about the oil demand outlook on global markets.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.