Activity in Texas’ oil and gas sector declined in the third quarter, according to a survey of energy executives by the Federal Reserve Bank of Dallas, as abundant crude supplies and slowing global demand led energy companies to pull rigs out of service and cut jobs.
The survey’s measure of business activity in the energy sector fell deeper into negative territory in the third quarter, indicating a contraction in the industry, according to the Dallas Fed. The business activity index fell to -7.4 in the third quarter from -0.6 in the second.
Oilfield services firms drove the decline, with the activity index in that sector falling to -24 in the third quarter, swinging from positive readings, which indicate an expansion, in the previous quarter.
“The industry is in a weaker place, and we expect to see some restructuring,” said Pia Orrenius, a senior business economist at the Federal Reserve Bank of Dallas. “We’re still producing and exporting lots of oil and gas, but the outlook is weak in the near term.”
The number of drilling rigs operating in U.S. oil and gas fields fell for the sixth consecutive week, hitting a two-year low, according to the Houston oilfield services company Baker Hughes. The U.S. rig count, now at 860, has plunged by more than 200 since the beginning of this year.
Texas by far led the decline this week, losing a net total of five rigs. The Permian Basin, the West Texas oil field driving the nation’s production boom, led the decline, with companies pulling three rigs from the shale play.
The state’s mining and logging industry, which in Texas is dominated by the oil and gas industry, has shed more than 5,000 jobs since May, including 1,800 in August, according to the Texas Workforce Commission. The sector has cut jobs in each of the past three months.
Oil prices, after spiking following the attack of a Saudi Arabian oil field, have since retreated as worries about global economic slowdown and weakening demand resurfaced. Oil settled at $55.91 a barrel in New York Friday, down 50 cents a barrel, or about 1 percent. Crude prices have fallen about 4 percent over the past week.
On average, executives surveyed by the Dallas Fed reported that they expect oil prices will be $56.92 per barrel by year-end 2019.