U.S. oil and gas production increased among firms surveyed by the Dallas Fed in Q3, but crude’s swing from $67 to $107 per barrel in less than three months has left producers struggling to decide where prices are headed.
Oil and gas output rose during the quarter among exploration and production firms surveyed by the Dallas Fed, which samples energy companies located or headquartered in Texas, southern New Mexico and northern Louisiana.
WTI averaged a closing price of around $86 per barrel during the quarter, but traded as low as $67 in early July before reaching $107 in mid-September as the Iran war disrupted Middle Eastern production and shipping, according to Reuters.
Dallas Fed respondents expect WTI to end 2026 at an average of $88 per barrel, but individual forecasts range from $70 to $126. The companies expect Henry Hub natural gas to finish the year at an average of $3.29 per million British thermal units.
“We are getting to the point in this global conflict and its effect on commodity markets that it is tough to predict what the remainder of 2026 and also 2027 will potentially look like,” one exploration and production executive told the Dallas Fed.
Oil production had already begun rising in the second quarter, when the Dallas Fed’s oil production index jumped from 0.0 in the first quarter to 15.0, while its Q2 gas production index was 3.7 and relatively unchanged. Capital spending also accelerated, with the index rising from 21.2 to 40.9 and 49% of firms reporting higher spending.
The latest survey shows both oil and gas production increased again in the third quarter across Texas, southern New Mexico and northern Louisiana, meaning producers have now reported rising output for two consecutive quarters. The region includes the Permian Basin, the country’s largest oil-producing basin, as well as the Eagle Ford and Haynesville.
The spending outlook was much weaker beyond the current increase. The index measuring expected capital expenditures for the following year was zero in the second quarter, even as current spending climbed.
U.S. inventories are adding another complication, with commercial crude stocks increasing by 900,000 barrels last week to 427.3 million barrels, according to EIA data released Wednesday. Distillate inventories moved in the opposite direction, falling 2.3 million barrels and leaving stocks 14% below their five-year average for this time of year.
By Charles Kennedy for Oilprice.com
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