Oil Business Activity Index Sinks to Historic Low
Activity in the oil and gas sector continued to deteriorate further during the second quarter of this year, according to responses to the latest Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of circumstances facing Eleventh District energy firms—fell from -50.9 in the first quarter to -66.1 in the second quarter, marking the lowest reading in the survey’s four-year history.
At the same time, the business activity index for oilfield services firms plummeted from -46.3 to -73.5, while the index for E&P firms slid from -53.3 to -62.6.
According to E&P executives, the oil production index declined sharply quarter over quarter, falling 36 points to -62.6. The gas production index also fell sharply from -21.2 to -47.8. The oil production index is at its lowest point in the survey’s history, according to the Dallas Fed.
In line with months of news headlines reflecting drastic operational decisions across the oilpatch, most of the survey’s indexes revealed worsening conditions for oilfield services firms.
- The equipment utilization index dropped from -47.2 to -69.2, another survey low.
- The operating margins index dropped from -50.0 to -68.6.
- While OFS firms saw a glimmer of relief when input costs collapsed—that index also fell from -11.3 to -50.0—the index of prices received for services also dropped from -37.7 to -64.7.
Meanwhile, the employment index came up negative for the fifth quarter in a row, sinking from -24.0 to -46.1, reflecting a pickup in the number of job losses.
While the company outlook index result improved for the period it was still negative at -51.0 in the second quarter, indicating outlooks deteriorated. While uncertainty is still running high, survey results showed slightly fewer firms indicating rising uncertainty this quarter.
On average, survey respondents anticipate a WTI oil price of $42.11 per barrel by year-end, with responses ranging from $22 to $65 per barrel; Henry Hub gas prices are also expected to be $2.15 per million British thermal units by year-end, according to the survey.
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