Optimism wanes among oil companies, Dallas Fed survey shows

By Curtis Williams

HOUSTON (Reuters) – Oil and gas activity remained essentially unchanged in the fourth quarter and optimism waned as uncertainty jumped, a survey of oil and gas executives by the Dallas Federal Reserve Bank showed.

Some of that uncertainty is centered around lower average oil prices and questions over OPEC’s ability to influence oil prices, said the Bank’s economist Kunal Patel.

“The company outlook for E&P (exploration and production) firms changed more drastically, as the company outlook index for these firms fell sharply from 46.8 to -9.0”, the survey showed.

Oil production increased in the US Lower 48 but at a slower pace, according to the survey. There is also an expectation of more large mergers and acquisitions.

“Executives at larger E&P firms are more likely to report their goal for 2024, their primary goal, is to acquire assets or reduce debt,” Patel said in a news conference on Wednesday.

The primary goal for smaller E&P firms in 2024 is to grow production, said Patel.

In 2024 there was a moderation in input cost increase for service firms, but it higher interest rates remain a concern, the survey showed.

“Increases in interest rates are starting to affect activity. We see demand as normal, but oversupply is more of an issue that has downward pressure on the price of oil,” another unnamed executive said.

Employment in the energy sector remained unchanged as rig count declined and the industry has become very efficient, said Patel.

The Israel-Hamas conflict has led to additional uncertainty, the survey showed.

Executives from 143 oil and gas firms were asked this month where they expect WTI crude oil to prices to settle at the end of 2024, with a 28% plurality responding $75-79.99 per barrel.

Production from new wells has been greater than expected but is more the result of higher output from specific sites rather than the number of wells, according to Patel.

Total U.S. crude production reached a record last week at 13.3 million barrels per day, according to the latest data from the Energy Information Administration on Wednesday. (This story has been corrected to rectify the attribution in the story from Dallas Federal Reserve Bank’s Head of Research Chiara Scotti to its economist Kunal Patel, in paragraphs 2, 6, 9 and 12)

(Reporting by Curtis Williams in Houston; Additional reporting by Georgina McCartney in Houston; Editing by Nick Zieminski)