Energy Activity Tumbles Again in 2Q; Outlook Dim -- Kansas City Fed
By Colin Kellaher
Energy activity in the middle of the U.S. plunged again in the
second quarter as energy prices remained low, and producers don't
expect a rebound any time soon, according to a survey by the
Federal Reserve Bank of Kansas City.
The quarterly Tenth District Energy Survey's key index of
drilling and business activity came in at minus 61 in the quarter,
an improvement from the record low minus 81 reading recorded in the
first quarter but indicating continued substantial decreases in
The survey's future drilling and business activity index
rebounded sharply to zero from a record low of minus 78 in the
first quarter, but it still indicated that energy activity is
expected to remain largely unchanged moving forward, as oil and gas
prices remain well below the levels producers say will prompt an
increase in drilling.
Energy firms surveyed by the bank, on average, said they need to
see oil at $51 a barrel and natural gas at $2.88 per million
British thermal units before they significantly ramp up drilling,
up from $47 and $2.74, respectively, in the prior quarter's survey.
The companies indicated that they think it will be more than a year
before prices reach those levels.
The price for West Texas Intermediate crude is expected to
average $41 a barrel in six months and $47 a barrel in one year,
while the average expected Henry Hub natural-gas prices were $2.17
and $2.41 a million Btu, respectively, according to the survey.
WTI futures, the U.S. crude benchmark, were recently up 1.3% to
$40.13 a barrel, while natural-gas futures rose 2.7% to $1.83 per
The bank said more than 62% of firms surveyed shut-in wells or
curtailed production in the second quarter due to low prices, while
nearly a third warned that they wouldn't survive a year if current
revenue levels persist.
The Kansas City Fed's quarterly survey monitors oil- and
gas-related companies located or based in the Tenth District, which
includes Colorado, Oklahoma, Wyoming, Nebraska, Kansas, the
northern half of New Mexico and the western third of Missouri.
Write to Colin Kellaher at email@example.com
(END) Dow Jones Newswires
July 10, 2020 13:50 ET (17:50 GMT)
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