Dallas Fed survey shows continued pessimism in energy sector
The same week that Brent crude oil prices fell below $60 a barrel for the first time since May, a new survey revealed growing pessimism among Texas oil and gas executives.
The Federal Reserve Bank of Dallas released its fourth quarter 2025 Dallas Fed Energy Survey, showing that overall business sentiment in the energy sector remains negative despite slight improvements in some indicators.
According to the survey, the business activity index remained negative, while the company outlook index, though slightly improved, continued to signal pessimism among firms. The outlook uncertainty index also stayed elevated, reflecting continued concern about market volatility, prices, and longer-term planning.
Oil and gas production largely unchanged
Executives at exploration and production firms reported that oil and gas production was little changed during the fourth quarter.
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The oil production index remained negative but showed a modest improvement
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The natural gas production index increased slightly
While production levels stabilized, survey responses indicated that firms are exercising caution amid lower prices and ongoing uncertainty.
Energy costs rise more slowly, margins remain tight
The survey found that energy costs increased at a slower pace in the fourth quarter compared with the previous quarter.
Among exploration and production firms:
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The finding and development costs index remained positive but declined
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The lease operating expenses index decreased slightly
Oilfield services companies, however, reported modest deterioration across most indicators.
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The equipment utilization index was largely unchanged
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The operating margin index remained negative, indicating continued margin compression
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The prices received for services index declined slightly
These results suggest continued pressure on service providers as operators remain cost-conscious.
Employment demand softens across sector
Respondents also indicated a decline in demand for employees, with workers logging fewer hours on average.
While the wages and benefits index remained positive, it declined slightly, signaling slower compensation growth even as firms attempt to retain skilled labor.
Price expectations show cautious optimism
Despite near-term pessimism, executives expressed more stable expectations for longer-term pricing.
Survey participants expect:
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West Texas Intermediate to average $62 per barrel at year-end 2026, with responses ranging from $50 to $82
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WTI prices of $69 in two years and $75 in five years
For natural gas:
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Henry Hub prices are expected to reach $4.19/MMBtu by year-end 2026
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Longer-term expectations rise to $4.57 in two years and $5.00 in five years
For reference, during the survey period WTI averaged $59 per barrel, while Henry Hub averaged $4.84/MMBtu.
Survey methodology
Data were collected Dec. 3–11, with 131 energy firms responding. Of those:
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90 were exploration and production companies
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41 were oilfield services firms