U.S. Oil and Gas Production Climbs Despite Extreme Oil Price Volatility
U.S. oil and gas producers covered by the Dallas Fed reported higher output in Q3, extending a two-quarter rise in production across Texas, southern New Mexico and northern Louisiana. Crude oil prices were highly volatile during the period, with WTI swinging from about $67 to $107 per barrel and averaging roughly $86 for the quarter, complicating firms' price outlooks.
Why It Matters
Rising U.S. production amid large price swings and uneven inventory signals could influence global market balances and company investment plans, particularly for firms operating in major basins such as the Permian. The uncertainty around future prices is affecting capital expenditure expectations and planning for exploration and production companies in the region.
Key Facts
- Survey source: Dallas Fed energy survey of firms in Texas, southern New Mexico and northern Louisiana
- Quarter: Q3 (third quarter)
- WTI price range during quarter: About $67 to $107 per barrel
- WTI quarterly average (closing price): Around $86 per barrel
- Dallas Fed forecast for WTI end-2026: Average $88 per barrel; range $70 to $126 per barrel among respondents
Exploration and production firms sampled by the Federal Reserve Bank of Dallas reported increased oil and gas output in Q3, marking the second consecutive quarter of production gains for companies in Texas, southern New Mexico and northern Louisiana. The survey region includes the Permian Basin as well as the Eagle Ford and Haynesville, which together make up a substantial portion of U.S. onshore hydrocarbon production.
Price volatility featured prominently in respondents' assessments: West Texas Intermediate crude swung from about $67 per barrel in early July to roughly $107 in mid-September, before averaging near $86 for the quarter. That volatility—driven in part by disruptions to Middle Eastern production and shipping tied to the Iran war, according to Reuters—has left companies divided on the outlook for prices, with individual end-2026 WTI forecasts in the Dallas Fed survey ranging from $70 to $126 per barrel and an average projection of $88.
Capital spending rose during the recent quarter — the Dallas Fed’s capital expenditures index jumped and 49% of firms reported higher current spending compared with the prior period — but sentiment toward future investment was weaker. The index measuring expected capital expenditures for the following year was zero in Q2, indicating cautiousness about sustaining higher spending beyond the immediate term.
Inventories add further complexity: U.S. commercial crude stocks increased by 900,000 barrels to 427.3 million barrels in the most recent EIA release cited, while distillate inventories fell by 2.3 million barrels and stood about 14% below the five-year average for this time of year. Producers told the Dallas Fed that the uncertain trajectory of the global conflict and its effects on commodity markets make it difficult to predict conditions for late 2026 and into 2027.
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