Oil and Gas Sector Expands But Pace Slows in Third Quarter
The oil and gas sector in the Eleventh District experienced further expansion in the third quarter of 2026, according to the Dallas Fed Energy Survey. The business activity index, which is the survey's broadest measure of conditions energy firms face, declined slightly from 46.1 in the second quarter to 38.8 in the third. This suggests a slowdown in the pace of expansion but still indicates solid growth.
The outlooks among upstream industry segments diverged significantly. Exploration and production (E&P) firms were more optimistic, with an outlook index of 50.0, while services firms remained neutral at 4.6. The overall uncertainty index remained essentially unchanged at 29.8, but E&P firms reported a higher uncertainty reading of 40.2 compared to services firms' 9.5.
Oil and natural gas production rose in the third quarter. Oil production increased from 15.0 in the second quarter to 20.7 in the third, while natural gas production climbed from 3.7 to 14.8. Despite this growth, cost pressures remained elevated across the sector, with input costs for oilfield services firms staying high at 60.4.
The survey found that labor market indicators improved modestly in the third quarter. The aggregate employment index rose from 4.7 to 15.2, and the aggregate employee hours index increased from 11.8 to 20.0, both indicating job growth and longer working hours. However, supplier delivery times continued to lengthen.