Dallas Fed Energy Growth
Dallas Fed Reports Third-Quarter Oil and Gas Production Growth Despite Slower Momentum
Anonymous
Key Points
1
The Dallas Fed’s business activity index fell from 46.1 in the second quarter to 38.8 in the third, while remaining positive; the survey covered executives at 125 firms across Texas, northern Louisiana and southern New Mexico.
2
The survey’s oil production index rose from 15 to 20.7, and its natural gas production index increased from 3.7 to 14.8.
3
Executives expected fuel-price spreads over crude—particularly for diesel—to take more than a year to return to 2025 levels.
4
Cost measures remained high: the oil-field-services input cost index eased only slightly, from 64.4 to 60.4, while finding and development costs and lease operating expenses registered 41.5 and 43.9, respectively.
Oil and gas production across the Dallas Federal Reserve's region expanded in the third quarter of 2026, but growth slowed from the previous quarter. Dallas News reported that the business activity index fell to 38.8 from 46.1, though it stayed positive. Surveyed executives at 125 firms across Texas, northern Louisiana, and southern New Mexico reported rising production and hiring, offset by higher costs and longer supply delays.
Global supply disruptions created wild swings in crude prices and left producers uncertain about the future. Oklahoma Energy Today noted that many executives expect Persian Gulf exports to stay below normal through at least mid-2027. Year-end price forecasts varied sharply, reflecting deep confusion in the market about where oil and gas are headed.
Production Gains Offset by Slowing Momentum
Oil production activity picked up notably in Q3. The Dallas Fed's oil production index rose from 15 to 20.7, marking solid progress for the region. Natural gas production climbed even faster, jumping from 3.7 to 14.8. Dallas News confirmed that activity grew in the Permian Basin and surrounding areas despite cost pressures.
Yet the overall slowdown signals caution. The business activity index dropping 7.3 points in one quarter suggests producers are hitting headwinds. Executives reported higher employment alongside the production gains, but the deceleration hints that optimism is wearing thin as supply chains strain and costs climb.
Supply Disruptions Driving Fuel Price Uncertainty
Global supply shocks are creating chaos in crude and refined fuel markets. Oklahoma Energy Today reported that executives expect fuel-price spreads over crude—especially for diesel—to take more than a year to return to 2025 levels. The persistence of these high spreads reflects tight refining capacity worldwide.
Producers face deep uncertainty about 2027. Many expect Persian Gulf exports to remain depressed through at least the second quarter of 2027, a sign they see global supply problems lingering. This prolonged shortage is forcing tough decisions about investment and output planning.
Cost Pressures Squeeze Oil and Gas Margins
High input costs continue to bite. The oil-field-services input cost index eased only slightly, from 64.4 to 60.4—still near record highs. Finding and development costs registered 41.5, while lease operating expenses hit 43.9. These elevated costs mean producers earn less per barrel despite rising output.
The squeeze is real. Executives reported longer waits for key supplies and rising prices across the sector. Dallas News noted that cost pressures persist even as activity grows. Without relief on input costs or a major jump in crude prices, profit margins will remain pinched through 2027.
Wells Across Texas Drive Regional Production
Texas remains the heartland of U.S. oil and gas. Texas Resources Corporation data shows that in July 2026, crude and natural gas production came from 154,978 oil wells and 82,624 gas wells statewide. These numbers underpin the Dallas Fed's regional growth figures and show the scale of infrastructure at work.
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