US oil and gas executives reported the strongest uptick in activity since 2022 in the latest survey from the Federal Reserve Bank of Dallas. The survey, which tracks exploration and production (E&P) activity in Texas and neighboring states, showed the business activity index rising from 21 in the first quarter to 46.1 in the second quarter, as oil prices rose sharply amid the US- and Israel-led conflict with Iran.
Of the 124 executives surveyed, 46% expect oil prices to range between $80 and $89.99/bbl by the end of 2026. Another 36% foresee prices settling in the $70 to $79.99/bbl range.
On the gas side, 47% of executives expect the Henry Hub benchmark to fall to $3.00–3.49/MMBtu by December, while another 25% anticipate higher prices, in the $3.50–$3.99/MMBtu range, by year end.
E&P executives were also asked when they expect the conflict with Iran to end. Responses were collected from 9 to 17 June, capturing views submitted both before and after the US announcement of a memorandum of understanding (MOU) with Iran.
Among responses submitted after the 15 June MOU, just over one-third expected the conflict to end in the current quarter, while 38% said it would likely wind down in the third quarter. In contrast, responses gathered prior to the agreement showed 60% anticipating a third-quarter resolution, with only 2% expecting the conflict to end in the second quarter.
Executives were also asked about the likelihood that Iran would permanently restrict oil exports from the Persian Gulf. A majority, 57%, said such a disruption is unlikely, while 33% described it as somewhat likely. Only 10% viewed it as very likely.
Turning to the domestic outlook, respondents with operations in the Permian Basin were asked when regional gas-takeaway constraints would ease sufficiently to support a return to positive local gas prices. Of the 24 executives who responded, 25% said the issue would be resolved by the first quarter of next year. The survey showed 17% expect relief in the second quarter of 2027, with another 17% pointing to the third quarter of 2027 as the likely timeframe for additional pipeline capacity.
Uncertainty Over Peace and Prices
The survey’s comments section provided additional context from executives across the E&P and oilfield services sector regarding the Middle East conflict and its impacts on US operations. Despite the survey’s general indication of rising activity, many responses emphasized the continued uncertainty around the direction of oil prices.
“Current political instability in oil markets due to the Iran war has crude oil and natural gas prices inflated. If there is a conclusion to hostilities, there will be continued confusion in the oil markets as normalcy may require time, but eventually calming oil markets will result in significantly lower prices,” said one oil and gas executive.
Another respondent questioned the likelihood of a lasting resolution. “The prospect that Iran will comply and conform with any agreement, written or oral, is, at best, wishing on a fantasy,” the executive said, adding that it is unlikely Israel “will elect not to act in what it considers to be its own interest,” leaving “the degree of uncertainty” substantial.
One anonymous respondent summarized the prevailing view, saying, “Prices are anyone’s guess.”
Executives from oilfield services firms expressed similar views.
“Predicting future operations given current conditions in all aspects of the business world, not just the oil and gas industry, seems to be next to impossible. Volatility remains the norm,” said one service firm executive.
Another said the uncertainty has “cast a shadow on long-term structural planning,” but noted that the business outlook over the next 2 to 3 years is “greatly improved.”
Fuel Prices Weigh on Service Providers
Several service firm executives also pointed to margin pressure from rising fuel costs. One noted diesel costs have surged by 65% since the start of the year, partially offsetting revenue gains. Others said higher input costs, combined with consolidation among E&P operators, have limited their ability to pass through price increases.
“As a service provider, we have seen pricing that has become much more competitive with the consolidation of the majors,” one executive said. “We are seeing smaller service providers come in and slash pricing to unrealistic numbers. The majors are accepting these price cuts temporarily until they start to experience service problems and failures.”
Despite the pressure, some respondents reported “small pricing gains” and said fuel surcharges are helping offset rising costs.
“Activity is more likely to increase than decrease. Supplies of rental tools and services are tight, and suppliers are demanding a return on investment. Capital decisions will be made based on a reward of a return, not the opportunity to supply,” replied one service firm representative.
The quarterly survey includes input from 82 oil and gas firms and 45 oilfield service companies located in Texas, northern Louisiana, and southern New Mexico.
