Oil and gas activity expanded further in the third quarter of 2026, although the pace of growth eased slightly as energy companies continued to face elevated operating costs and longer supplier delivery times.
According to the latest Dallas Fed Energy Survey, the business activity index declined from 46.1 in the second quarter to 38.8 in the third quarter. Despite the decline, the index remained firmly positive, indicating continued expansion across the energy sector.
The survey collected responses from 125 energy firms, including 83 exploration and production (E&P) companies and 42 oilfield services firms.
Oil and Natural Gas Production Increases
E&P companies reported higher production of both oil and natural gas during the third quarter.
The oil production index increased from 15.0 to 20.7, while the natural gas production index rose from 3.7 to 14.8.
The figures indicate that production activity continued to expand despite the wider cost and supply-chain pressures affecting the sector.
E&P Outlook Remains Positive
The survey showed a significant difference between the outlooks of E&P companies and oilfield services businesses.
E&P firms recorded an outlook index of 50.0, compared with 4.6 for oilfield services firms. At the same time, uncertainty was considerably higher among E&P companies, with an uncertainty index of 40.2 compared with 9.5 for services firms.
The results point to continued confidence among producers alongside greater uncertainty about future operating conditions.
Cost Pressures Remain Elevated
Energy companies continued to face above-average cost pressures during the quarter.
Among oilfield services firms, the input cost index remained high at 60.4, although it declined from 64.4 in the second quarter.
For E&P companies, the finding and development costs index stood at 41.5, while the lease operating expenses index was 43.9. Both remained above their respective series averages.
The continued elevation of these indicators suggests that cost growth remains an important factor for companies planning production and investment.
Oilfield Services Activity Improves
Oilfield services companies reported improvement across several operating indicators.
The equipment utilisation index increased from 31.9 to 41.9, indicating stronger use of available equipment.
However, the operating margin index declined from 52.2 to 37.2, while the prices received for services index decreased from 24.5 to 16.3. Both remained positive, but the figures indicate that the pace of improvement moderated during the quarter.
Employment and Working Hours Increase
Labour market indicators also improved during the third quarter.
The aggregate employment index increased from 4.7 to 15.2, while the employee hours index rose from 11.8 to 20.0.
The wages and benefits index remained positive at 23.2, although it was slightly below the second-quarter reading of 26.0.
Supplier Delivery Times Continue to Lengthen
Longer supplier delivery times remain another challenge for the oil and gas sector.
The overall supplier delivery time index increased from 31.7 to 36.2. Among E&P firms, the index remained elevated at 43.9, while the oilfield services index increased from 11.1 to 21.4.
The figures indicate that companies continue to experience extended delivery times for equipment and other inputs required for energy operations.
Oil and Gas Price Expectations
Survey respondents expect the West Texas Intermediate (WTI) oil price to average approximately $88 per barrel at the end of 2026, with individual forecasts ranging from $70 to $126 per barrel.
For Henry Hub natural gas, respondents expect an average price of approximately $3.29 per MMBtu at the end of 2026.
Longer-term expectations put WTI at approximately $79 per barrel two years from now and $82 per barrel five years from now, while Henry Hub gas was expected to reach $3.82 and $4.28 per MMBtu over the same periods.
Oil and Gas Sector Maintains Expansion
The latest Dallas Fed survey points to continued expansion across the oil and gas industry, supported by higher oil and natural gas production and improving utilisation among oilfield services companies.
At the same time, elevated costs, longer supplier delivery times and uncertainty remain important considerations for E&P companies and their service providers.
The combination of rising production and persistent cost pressures will continue to shape investment, equipment demand and operating strategies across the US oil and gas sector.
