Steady Production Amidst Low Confidence: Insights From the Dallas Fed Energy Survey
Overview of Current Industry Sentiment
According to the latest Dallas Fed Energy Survey, oil producers in New Mexico and Texas are facing a challenging landscape, with little change in production levels despite ongoing concerns about market conditions. Conducted from December 3-11, the survey gathered insights from 131 executives across the oil and gas sector, highlighting a pervasive sense of stagnation and low confidence.
Key Findings from the Q4 2025 Survey
The quarterly survey revealed a business activity index of -6.2, reflecting nearly unchanged conditions from the previous quarter. While the oil production index showed slight improvement to -3.4 from -8.6, it remained in negative territory. Conversely, the natural gas production index rebounded to 0 from -3.2, indicating some stabilization in that sector.
Executives attributed these trends primarily to low West Texas Intermediate (WTI) oil prices, which averaged $59 per barrel during the survey period. This price point is below the threshold required for many companies to engage in profitable drilling. Forecasts suggest a modest recovery, with expectations of $62 per barrel by the end of 2026 and long-term estimates reaching $69, as noted in the Albuquerque Journal.
The Role of the Permian Basin
The Permian Basin, which spans West Texas and southeastern New Mexico, continues to be a critical player in U.S. oil production, accounting for nearly half of the national output. New Mexico ranks as the second-largest crude oil producer in the country, significantly impacting the overall production metrics. However, the forecast for U.S. crude production suggests a flat trajectory, remaining at approximately 13.5 million barrels per day through Q4 2025.
Implications for Employment and Industry Outlook
Despite steady production levels, the survey highlighted a decline in employment demand, with many workers in the industry reporting reduced hours. Over half of the respondents anticipate stable employment levels for the upcoming year, although concerns about geopolitical tensions and U.S. policy changes loom large. These factors contribute to a cautious outlook among executives, particularly in the oilfield services sector, where equipment utilization and profit margins have deteriorated.
As the oil and gas industry navigates these challenges, the ability to adapt to fluctuating prices and market demands will be crucial for maintaining stability in production and employment. Smaller exploration and production firms have shown a slightly more optimistic outlook regarding capital expenditures, while larger companies are adopting a more conservative approach.
