With world oil prices continuing to drift in the mid forties, the Federal Reserve Bank of Dallas, in its quarterly energy report, is picking up increasingly bearish sentiment in the fracking patch, News Radio 1200 WOAI reports.
"The recent downturn in oil prices has made the outlook murkier for the industry," said Michael Plante, an economist with the Dallas Fed.
After optimism that summer demand would push prices over the $50 barrier for good, continued high inventories, plus increasing production from not just U.S. producers, but OPEC members Libya and Nigeria, have pushed WTI prices down to a little over $46 a barrel on world markets today.
Many frackers had hoped that a combination of factors, from OPEC production cuts, to increased demand, to cuts in a global glut of oil, would allow prices to float above $50, and possibly into the upper $50 level to near $60. That is currently considered to be the 'sweet spot,' which would allow producers in Texas to make a profit and increase drilling, while keeping gas prices for consumers reasonable.
"With many forward looking indicators softening in this quarter compared to last, it is possible that activity levels could grow at a slower pace in the coming quarter," Plante said.
He says the 'business activity index, while not as strong as the first quarter of 2017, remains strong, so there is no indication of cutbacks in the Texas oil fields.
The lower prices are giving motorists a summer boost at the pump. The average at the pump in metro San Antonio today, is $1.95, the lowest Fourth of July price this decade, and prices continue to fall, even though we're into the peak demand summer travel season.