US oil executives see slight output growth, future outlook uncertain, survey says

By Siddharth Cavale

NEW YORK, June 24 (Reuters) – U.S. oil executives expect domestic oil production to increase slightly at current prices but said geopolitical uncertainties and regulatory issues cloud their outlook for long-term planning, according ​to a Dallas Fed survey.

The survey, which collected data from June ‌9 to June 17 from 124 oil and gas firms, showed that oil and gas activity increased at its fastest pace in four years during the second quarter, but it was also accompanied by mounting cost pressures that were higher than historical norms, said Kunal ‌Patel, ​senior business economist with the Dallas Fed.

Input costs for ⁠oilfield service firms jumped dramatically ⁠because of higher labor and fuel expenses, respondents to the survey said.

Patel said most oil companies expect a small increase in production at current prices. “Internally, we are expecting 2 to 3% (growth in production),” Patel said. U.S. ​West Texas Intermediate prices were trading at around $70 a barrel on Wednesday.

Here are some insights from the survey:

• Rapid changes in international  geopolitics make for ⁠a “cloudy windshield” view of the future direction of  ⁠oil price and demand, one exploration and production executive said ​while another noted that regulatory compliance was becoming a major expense.

• “Under the current ​conditions with the Iranian war, it is hard to predict the ‌price of crude oil with any amount of certainty. My guess is that we will see higher prices for both crude oil and natural gas for several months even with a ceasefire agreement,” an exploration and production firm executive said.

• ⁠Asked what price WTI will peak at this year if the Iran conflict continues through year end, two-thirds of respondents said prices would peak at $125 or less, ⁠while 20% said they expect ‌it to be between $125 and $150.

• Many executives said they ⁠do not expect the oil market to return to ​previous conditions ‌and believe markets have been permanently re-ordered, with the ​risk premium ⁠for oil coming from the Persian Gulf expected to continue.

• One oil and gas services executive noted that while business activity increased in the second quarter, a 65% rise in diesel costs has partially offset revenue growth. Another noted that equipment pricing has not kept pace with inflation.

(Reporting by Siddharth Cavale in New York; ​Editing by Sanjeev Miglani)