Results from the latest survey by the Federal Reserve Bank of Dallas show higher expectations for oil prices over the remainder of the year, a shift from earlier surveys that largely anticipated prices would see only a modest rise or remain flat in 2026.
The change in sentiment follows the outbreak of US-Israeli airstrikes against Iran, which has responded with missile and drone attacks across the Middle East, disrupting regional stability and slowing energy exports through the Strait of Hormuz.
In the survey released on 25 March, respondents said they expect oil prices to average about $74/bbl by year‑end 2026, up from $62/bbl in the previous survey from December.
Of those surveyed, 27% of respondents said they expect US oil prices to range between $60 and $69/bbl by year-end. The largest share, 41%, forecast prices of $70 to $79/bbl, while 22% see prices in the $80 to $89/bbl range.
Respondents said they require an average oil price of $66/bbl to profitably drill new wells, up from a $65 breakeven handle cited in last year’s survey. Larger producers, defined as those producing more than 10,000 B/D, said they can drill profitably at $59/bbl, while smaller firms reported needing at least $68/bbl to add new wells to their inventories.
Despite rising oil prices in recent weeks, 69% of large producers said they have made no changes to their drilling plans this year, while 31% reported plans to increase new wells either slightly or significantly.
Among smaller producers, 38% said they do not plan to increase drilling activity, while 29% expect to add slightly more wells and another 29% said they plan a significant increase this year.
Producers Unsure About Near-Term Impacts
In written comments, one executive said the company now plans to drill six wells this year, up from earlier plans to drill none.
Several executives were more cautious, with one saying many operators are likely to take a “wait‑and‑see” approach over the next 6 months as the Middle East conflict unfolds.
Another executive said pricing would remain “uncertain” in the next quarter, or until the Strait of Hormuz is made safe again for tanker transit. “I would think any short- or long-term planning has been put on hold for the next 2 to 3 months,” they said.
While some respondents welcomed higher prices, noting they could help offset losses incurred last year, others cautioned that costs were also rising across the supply chain. One executive said the company was seeing higher prices for cementing, logging, perforating and other well‑completion services. Another reported higher quotes for tubular products, warning that certain well equipment “may not only get more expensive, but get downright scarce” amid global commodity disruptions stemming from the conflict.
Several executives said they believe the recent runup in global oil prices will prove temporary, with prices expected to ease once the conflict subsides. “How sustainable are current oil prices? Hard to make long-term commitments or to ‘drill, baby, drill,’” one respondent said.
Beyond market volatility, one executive voiced discomfort with profiting from the conflict, saying “it feels awful.” Another added that “Everyone is hoping and praying for a quick end to the war.”
Service Companies Also Feeling Uncertainty
Service companies echoed concerns over uncertainty raised by oil and gas producers. One oilfield service executive said drilling rig activity is expected to rise but is unlikely to “dramatically impact” day rates.
Another executive said that while the company has no direct exposure to the Middle East, it has nonetheless felt the economic uncertainty resulting from the conflict.
“It is extremely difficult to estimate commodity prices 9 to 10 months other than to guess that oil and gas prices are likely to be slightly elevated above pre-conflict levels as markets catch up with lost activity or deliveries during the war,” they said.
A different service company executive said firms are “stuck in an unsustainable business environment” as rising input costs for oilfield equipment collide with pressure from oil and gas companies to lower prices.
One executive summed up the mood, saying simply, “Strange days indeed.”
Sector Consolidation, Improving Production
While the war in the Middle East attracted the most input from survey respondents, they were also asked about the outlook for US consolidation and improved recovery from tight-oil and gas wells.
On consolidation, 47% of respondents said they expect the number of publicly listed US producers with a market capitalization above $1 billion to fall from about 30 to between 19 and 24 by the end of the decade. About a quarter of respondents forecast a sharper decline, to between 13 and 18 companies, while 17% expect more than 25 to remain.
When asked about upstream firms’ ability to boost oil recovery rates, only 16% of respondents said they were confident significant gains could be achieved. The majority, 60%, expected recovery rates to increase slightly, while 7% foresaw no change and 17% predicted a decline.
Expectations for natural gas were similar, with 61% predicting a slight increase in recovery rates. Another 18% expected significant gains, while 15% foresaw no change and 6% expected lower recovery.
The quarterly survey was run from 11 to 19 March and includes participants from 92 oil and gas producers and 43 oilfield service firms located in located in Texas, northern Louisiana, and southern New Mexico.
