Soaring costs have caused a slowdown in oil and gas production growth in the U.S., with the outlook also worsening, the latest edition of the Dallas Fed Energy Survey showed.
Source: Reuters
The survey found that business activity in the oil and gas industry remained almost unchanged in the first quarter of this year from the last quarter of 2022, even though oil and gas production both grew. However, that growth was more modest than in the fourth quarter of 2022.
Respondents in the energy survey complained about higher costs for the ninth quarter in a row, suggesting inflation was still very much a problem for the oil patch. The breakeven price across the U.S. oil patch has risen from $34 per barrel last year to $37, with the price range necessary for producers to cover their operating expenses at between $29 and $45 per barrel.
Supply chain problems, however, seem to be diminishing, as suggested by the fact that delivery times for materials and equipment fell from the last quarter of 2022 to the first quarter of this year.
Unsurprisingly, with the outlook for the industry a bit gloomy, industry executives expect lower oil prices than they did in the previous quarter. The average price forecast is $79.64 for a barrel of WTI at the end of 2023, which is down from $83.63 per barrel, which was the average forecast in the prior quarter.
More than 40 percent of respondents expect WTI to average between $80 and $90 per barrel this year, while a little over 35 percent expect it to trade between $70 and $80 a barrel. Only a minority of about 5 percent expect the price of U.S. crude to reach $100 this year, and a little more expect it to fall even lower, to $60-70 per barrel.
By Irina Slav for Oilprice.com
