RIYADH: Driven by a fall in crude and commodities pricing, oil and gas production in the US is decelerating at a time when demand is showing signs of recovery, research by the Federal Reserve Bank of Dallas has shown.
The survey posted a score of zero for business activity growth in the second quarter of 2023 among 150 oil and gas groups in its region, the lowest since 2020 when oil prices crashed due to the pandemic, ultimately forcing operators to close rigs and cut headcounts.
“Weak oil and gas prices” and “high costs” had “brought growth in oil and gas activity to a standstill in the second quarter,” said Michael Plante, senior research economist and adviser at the Dallas Fed, according to the Financial Times.
“We’re not certain of what to expect. The highs were too high. The lows, too low,” said one Dallas Fed survey respondent.
On average, the survey respondents expect a West Texas Intermediate oil price of $77 per barrel by year-end 2023.
On the other hand, survey participants expect a Henry Hub natural gas price of $2.97 per million British thermal units by the end of this year.
Earlier in June, energy services firm Baker Hughes Co. also echoed similar views and noted that US energy firms, in the week ended on June 23, cut the number of oil and natural gas rigs operating for an eighth week in a row for the first time since July 2020.
According to the report, the oil and gas rig count, an early indicator of future output, fell by five to 682 at the end of last week, the lowest since April 2022.
Baker Hughes said that puts the total rig count down 71 rigs, or 9 percent, over this time last year.
The FT report further added that the prospects for shale oil production in the US currently depend on how the global economy develops in the coming months.
Oil prices will rise and drilling will again become profitable if the global economy recovers, along with acceleration in growing demand.
On June 22, the Energy Information Administration reported that US crude inventories fell by 3.8 million barrels to 463.3 million barrels in the week ended on June 16.
