Volatility, instability, uncertainty.
These were some of the words used in a comment section of the third quarter Dallas Fed Energy Survey, outlining a theme among respondents in the latest questionnaire.
“The Iranian conflict continues to be the wild card in the industry,” one exploration and production (E&P) company said in the survey.
“Its movement correlates with commodity prices,” the company added.
Another E&P company said, “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”.
A separate E&P company noted that pricing volatility “is near an all-time high given the backdrop of Iran”.
“Swings of $5, $10, and $20 up or down are common,” this company highlighted.
“It is very challenging to select a planning price or budgeting price. Companies must look at the steep backwardation and budget off of a $65 per barrel or $70 per barrel price while operating expenses per barrel and finding and development pricing is increasing quickly,” it added.
Another E&P company warned in the survey that “instability will be the word for energy markets with no end in sight until the oil delivery stabilizes in the Middle East”.
“Most instability is tied to the 2026 Iran war. Remember the oil markets from 2012-2020? One hundred dollars per barrel to extreme lows of -$30 per barrel?” it added.
“What an economic turmoil that was. Is 2026 a repeat?” it asked.
One more E&P company said “increased geopolitical volatility, including tariffs, increasing cost of doing business, and increasing lead times for execution are issues affecting our business”.
A separate E&P company noted in the survey that “geopolitical uncertainty is still the primary concern of many small businesses”.
Another one said “it sure would be nice to have a less volatile market”, one more said “the political climate will continue to whipsaw prices until there is major change”, and a separate company warned that “oil movement around the world is the major unknown today”.
“There will be continuing lack of predictable pricing as long as the current war is continuing,” another E&P company said in the survey.
A separate E&P company noted that “uncertainty on prices caused some concern” but added that “with increased cash flow” it was “spending more”.
Another company warned that “there is still too much chaos” but said “it is leading to a bullish oil price sentiment because of all of the ramifications of what has taken place in the Middle East”.
Also in the comment section of the third quarter Dallas Fed Energy Survey, one oil and gas support services firm warned that “war in the Middle East has impacted tender activity due to uncertainty regarding the Strait of Hormuz”.
Another oil and gas support services firm said “geopolitical uncertainty seems to still be holding activity back”.
“The question is: where will the new floor sit after the Middle East calms down? Although with WTI in the $90s per barrel and pushing $100, if prices stay here for the next month, that will hopefully be a strong motivator,” it added.
A respondent from a separate oil and gas support services company said, “my oil price crystal ball broke when the administration first hit Iran”.
Q3 Activity
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 survey noted.
“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,” the survey said, noting that “this suggests the pace of expansion slowed slightly but remained solid”.
The survey highlighted that 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,” it said.
“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,” it added.
Both oil and natural gas production rose in the third quarter, according to E&P executives, the survey highlighted.
“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,” it pointed out.
Cost pressures remained elevated across the sector, according to the survey.
“Among oilfield services firms, the input cost index stayed elevated but edged down from 64.4 to 60.4,” it noted.
“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,” it added.
“All cost indexes were above their series averages, suggesting costs are growing at a faster-than-average pace,” it continued.
The survey also stated that 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,” it said.
“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,” it added.
Labor market indicators also “improved modestly” in the third quarter, according to the survey.
“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 survey said.
“The aggregate wages and benefits index remained positive but edged down from 26.0 to 23.2,” it added.
The survey went on to note that 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,” it said.
“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,” it added.
Data for the latest survey was collected from September 16-24, according to the survey, which highlighted that 125 energy firms responded. Of these, 83 were exploration and production firms and 42 were oilfield services firms, the survey revealed.
The Dallas Fed conducts the Dallas Fed Energy Survey quarterly to obtain a timely assessment of energy activity among oil and gas firms located or headquartered in the Eleventh District, the survey stated, noting that the Eleventh District encompasses Texas, northern Louisiana and southern New Mexico.
“Firms are asked whether business activity, employment, capital expenditures and other indicators increased, decreased or remained unchanged compared with the prior quarter and with the same quarter a year ago,” the survey noted.
“Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase,” it added.
“When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the previous quarter,” it continued.
“If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the previous quarter,” it went on to state.
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