Dallas Fed reports positive trends in oil and gas sector in fourth sector

(The Center Square) – Activity in the oil and gas sector jumped in fourth quarter of 2020. That’s according to the Dallas Fed, based on oil and gas executives’ responses to its quarterly Energy Survey.

Oil futures and indexes rose the first week of 2021 in response to an agreement reached with OPEC+.

The business activity index – the Fed survey’s broadest measure of conditions facing Eleventh District energy firms – showed positive signs rising from -6.6 in the third quarter to 18.5 in the fourth quarter. The natural gas production index also increased by eight points.

“This is the first positive reading for the business activity index since first quarter 2019,” the Dallas Fed said in a statement.

On Thursday, oil futures rose after data showed a larger-than-expected drop in U.S. crude inventories. On Friday oil prices held steady after the West Texas Index (WTI) surpassed 50 dollars per barrel this week and Brent oil topped $55 a barrel for the first time since February. Both rose after a production agreement was reached with OPEC+.

Saudi Arabian officials surpassed market expectations by pledging to cut production by 1 million barrels a day in February and March.

Crude has also surged by nearly 50% since the end of October, when news of vaccines began to emerge, Bloomberg News reports.

The Dallas Fed’s report indicates that oilfield services firms saw improvement in some indicators in the fourth quarter. While the equipment utilization index increased 25 points in the fourth quarter, the first positive reading since second quarter 2019, operating margins continued to decline.

Oil and gas industry employment also continued to decline, the Fed notes, with layoffs abating. The sector’s aggregate employment index posted a seventh consecutive negative reading but also showed a positive increase, moving from -18.1 to -11.7. The index of aggregate employee hours worked also remained negative, but also increased from -15.3 to -6.9, as did the index for aggregate wages and benefits from -19.4 to -12.4.

“Six-month outlooks improved notably, with the index rising from 1.9 last quarter to 21.6,” the report states, “a stark recovery from the significantly negative readings in first and second quarter 2020. Additionally, firms noted less uncertainty around their outlook this quarter than last … the lowest reading for the uncertainty index since its inception in first quarter 2017.”

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