Dallas Fed Energy Survey: Oil and gas activity increases despite cost pressures, longer supplier delivery times

Oil and gas activity increases despite cost pressures, longer supplier delivery times

Activity in the oil and gas sector further expanded in third quarter 2026, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index, the survey’s broadest measure of the conditions energy firms face in the Eleventh District, remained positive but declined slightly from 46.1 in the second quarter to 38.8 in the third. This suggests the pace of expansion slowed slightly but remained solid.

Outlooks diverged notably between the upstream industry’s two principal segments. E&P firms were more positive, with an outlook index of 50.0, while services firms remained far more neutral, with an outlook index of 4.6. The overall outlook uncertainty index was essentially unchanged at 29.8. Notably, E&P firms reported a higher uncertainty reading of 40.2, compared with 9.5 for services firms. This suggests that uncertainty increased overall, with E&P firms more likely than services firms to report rising uncertainty.

Both oil and natural gas production rose in the third quarter, according to E&P executives. The oil production index increased from 15.0 in the second quarter to 20.7 in the third. Meanwhile, the natural gas production index climbed from 3.7 to 14.8.

Cost pressures remained elevated across the sector. Among oilfield services firms, the input cost index stayed elevated but edged down from 64.4 to 60.4. Among E&P firms, the finding and development costs index and the lease operating expenses index were relatively unchanged at 41.5 and 43.9, respectively. All cost indexes were above their series averages, suggesting costs are growing at a faster-than-average pace.

Oilfield services firms reported improvement in most indicators. The equipment utilization index increased from 31.9 in the second quarter to 41.9 in the third. The operating margin index remained positive but decreased from 52.2 to 37.2, suggesting margins expanded at a slightly slower pace. The prices received for services index also remained positive but declined slightly from 24.5 to 16.3.

Labor market indicators improved modestly in the third quarter. The aggregate employment index rose from 4.7 to 15.2, and the aggregate employee hours index increased from 11.8 to 20.0, both pointing to modest job growth and longer hours worked. The aggregate wages and benefits index remained positive but edged down from 26.0 to 23.2.

Supplier delivery times continued to lengthen. The supplier delivery time index for all firms remained positive and ticked up slightly from 31.7 to 36.2. Among E&P firms, the index was elevated and was relatively unchanged at 43.9, while among oilfield services firms, the index moved up from 11.1 to 21.4.

On average, respondents expect a West Texas Intermediate (WTI) oil price of $88 per barrel at year-end 2026; responses ranged from $70 to $126 per barrel. When asked about longer-term expectations, respondents on average said they expect a WTI oil price of $79 per barrel two years from now and $82 per barrel five years from now. Survey participants foresee a Henry Hub natural gas price of $3.29 per million British thermal units (MMBtu) at year-end 2026. When asked about longer-term expectations, respondents on average said they anticipate a Henry Hub gas price of $3.82 per MMBtu two years from now and $4.28 per MMBtu five years from now. For reference, WTI spot prices averaged $98.70 per barrel during the survey collection period, and Henry Hub spot prices averaged $2.97 per MMBtu.

Next release: Dec. 16, 2026