Riyadh: Oil and gas production in the US is slowing down at a time when demand is beginning to rebound, according to research from the Federal Reserve Bank of Dallas, which is being driven by a decline in the price of crude and other commodities.
The survey reported 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 reduce headcount.
In the second quarter, "weak oil and gas prices" and "high costs" had "brought growth in oil and gas activity to a standstill," according to Michael Plante, senior research economist and adviser at the Dallas Fed, as reported by the Financial Times.
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"We don't know what to anticipate. The peaks were excessive. The lows are too low," said one participant in the Dallas Fed survey.
By the end of 2023, survey participants anticipate that the price of West Texas Intermediate oil will be $77 per barrel on average.
On the other hand, respondents to the survey anticipate that by the end of this year, the Henry Hub natural gas price will be $2.97 per million Btu.
Energy services company Baker Hughes Co. expressed similar opinions earlier in June and pointed out that US energy firms reduced the number of oil and natural gas rigs operating for an eighth week in a row for the first time since July 2020 during the week ended on 23 June.
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The oil and gas rig count, a leading indicator of future output, decreased by five to 682 at the end of the previous week, the lowest level since April 2022, according to the report.
That reduces the overall rig count by 71, or 9%, from this time last year, according to Baker Hughes.
The FT report also stated that how the world economy performs over the next few months will have an impact on the prospects for shale oil production in the US.
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If the world economy recovers and growing demand accelerates, oil prices will rise and drilling will once more be profitable.
As of the week ending June 22, US crude inventories had decreased by 3.8 million barrels to 463.3 million barrels, according to the Energy Information Administration.