Oil and gas drilling in the region covered by the Federal Reserve Bank of Kansas City showed a moderate increase according to the bank’s latest Energy Survey.
Chad Wilkerson, vice president and economist at the Bank said the survey showed activity had moved higher than year-ago levels for the first time since March 2019 and expectations also increased further.
“District drilling and business activity continued to be quite solid in Q1, and expectations indicated further growth in the next six months,” said Wilkerson. “In addition, many firms reported growth in employment for the first time since early 2019, and price expectations for crude oil were the highest they have been in over two years.”
This quarter firms were asked what oil and natural gas prices were needed for drilling to remain profitable on average across the fields in which they are active (in alternate quarters they are asked what prices are needed for a substantial increase in drilling to occur).
The average oil price needed was $53 per barrel, with a range of $35 to $80 (Chart 2). This average was higher than prices needed to remain profitable in Q3 2020, but still lower than prices for the past several years. The average natural gas price needed was $2.94 per million Btu, with responses ranging from $0.75 to $5.00.