Oil and gas energy activity in Oklahoma, Colorado and the northern part of New Mexico fell in the first quarter of 2024, the Federal Reserve Bank of Kansas City said on Friday in its quarterly survey of energy activity.
Drilling and business activity contracted for a fifth straight quarter and will likely continue to fall over the next six months, according to the survey, which included responses from 33 firms operating in the Midwest, the Rockies and parts of New Mexico.
More than 75% of survey respondents agreed that consolidation in the oil sector will lead to more cautious production growth.
Participants in the survey expect West Texas Intermediate (WTI) oil prices to average $81 a barrel six months from now and $83 a barrel in a year’s time. WTI is currently trading near $86 a barrel.
Oil needs to average $65 a barrel to drill profitably, up $1 a barrel from the average estimate a year ago, survey participants said. And companies would need WTI prices to touch $90 a barrel to substantially increase drilling.
Survey respondents expect Henry Hub natural gas prices to average $2.16 per million British thermal units (mmBtu) in six months’ time. Gas prices this year fell to 3-1/2-year lows on oversupply and were trading at $1.763 per mmBTU on Friday.
“The USA is way over-supplied in natural gas, hence exports of LNG are critical. As LNG projects for exports are delayed, natural gas will back up in the USA,” one respondent said.
(Reporting by Georgina McCartney in Houston; Editing by Liz Hampton and Leslie Adler)