Key facts
- US oil and gas output rose in Q3 among exploration and production firms surveyed by the Dallas Fed.
- WTI crude averaged $86 per barrel in Q3, with prices ranging from $67 to $107.
- Producers expect WTI to average $88 per barrel by the end of 2026.
- Henry Hub natural gas is expected to finish 2026 at an average of $3.29 per million British thermal units.
- Capital spending by producers accelerated in Q3, with 49% reporting higher spending.
- Commercial crude inventories increased by 900,000 barrels last week.
U.S. oil and gas production saw an increase among firms surveyed by the Dallas Fed in the third quarter, despite significant volatility in crude oil prices. West Texas Intermediate (WTI) crude prices experienced a sharp swing, trading from $67 per barrel in early July to $107 in mid-September, influenced by disruptions to Middle Eastern production and shipping amid the Iran conflict.
Despite the price swings, exploration and production companies reported rising output for the second consecutive quarter across key regions including the Permian Basin, Eagle Ford, and Haynesville. Capital spending also accelerated, with 49% of surveyed firms reporting higher expenditures.
However, the outlook for future capital expenditures remained subdued, with the index measuring expected spending for the following year at zero in the second quarter. Producers expressed difficulty in predicting market conditions for the remainder of 2026 and 2027 due to the global conflict's impact on commodity markets.
Complicating the market landscape, U.S. commercial crude inventories increased by 900,000 barrels last week, reaching 427.3 million barrels. Conversely, distillate inventories fell by 2.3 million barrels, leaving them 14% below their five-year average.