Oil executives say price swings make it hard to 'drill, baby, drill,' Dallas Fed survey shows

By Siddharth Cavale

NEW YORK, March 25 (Reuters) - Activity in the U.S. oil and gas sector in the key producing states of Texas, Louisiana and New Mexico increased in the first quarter of 2026 although output was steady for now, a survey released by the Federal Reserve Bank of Dallas on Wednesday found.

Executives are waiting to see where prices settle over the next few months, the survey found.

Volatility and supply disruption caused by the Iran war are delaying investments , the Dallas Fed said, but it expects the focus on energy security to rise.

Major oil producers are not hurrying to drill new wells, even though current oil prices near $90 a barrel far exceed the $66 per barrel they say they need to turn a profit, the survey found.

Half of the executives surveyed, all of whom said their firms drilled or completed horizontal wells in the past two years, said the number of wells they expect to drill in 2026 has not changed since the start of the year.

Executives at smaller exploration and production (E&P) firms were more likely than those at larger companies to say they had increased drilling plans. Larger producers typically need prices to stick for two to three months before adjusting their plans, Kunal Patel, a senior business economist at the Federal Reserve Bank of Dallas, told reporters on a conference call, noting the time it takes to secure hydraulic fracturing crews and rigs.

He added, however, that one respondent said they planned to drill six wells in 2026, up from zero before oil prices rose, according to the survey.

While smaller E&P firms are more numerous in the United States, larger producers account for more than 80% of total output.

“How sustainable are current oil prices? Hard to make long‑term commitments or to ‘drill, baby, drill,’” one executive wrote in the survey, referring to President Donald Trump’s Inauguration Day call for producers to boost drilling, even as the United States has been the world’s top crude oil and liquefied natural gas producer for several years.

GEOPOLITICAL UNCERTAINTY WEIGHS ON OUTLOOK

Several respondents said uncertainty has increased due to the Iran war, adding that oil prices in the coming quarter will largely depend on how quickly the Strait of Hormuz can be fully reopened.

“In the quarter ahead, all pricing is uncertain until safe navigation through the Strait of Hormuz can be achieved. I would think any short‑ or long‑term planning has been put on hold for the next two to three months,” one exploration and production executive wrote in comments to the Dallas Fed.

The U.S.-Israeli strikes on Iran all but halted shipments of oil and liquefied natural gas through the Strait of Hormuz, which typically carries about one-fifth of the world's LNG and crude supply. The result is a daily loss of around 20 million barrels of crude, meaning after 25 days a loss of some 500 million barrels, or five full days of global supply.

Still, U.S. shale oil and gas companies expect West Texas Intermediate crude to average $74 a barrel at year‑end 2026, the survey showed, saying an end to hostilities will result in a sharp drop in prices. WTI prices averaged $94.65 a barrel during the survey period, Patel said. Respondents also forecast a Henry Hub natural gas price of $3.60 per million British thermal units at the end of 2026.

Weighing on sentiment, data from the U.S. Energy Information Administration showed crude inventories rose by 6.9 million barrels to 456.2 million barrels in the week ended March 20, compared with analysts’ expectations in a Reuters poll for a 477,000‑barrel increase.

The survey was conducted between March 11 and 19. Respondents said costs in the first quarter rose slightly faster than they did in the fourth quarter.

Of the 135 respondents, 92 were exploration and production firms and 43 were oilfield services companies, the Dallas Fed added.