Two-thirds of oil businesses under the Federal Reserve Bank of Dallas’ jurisdiction think oil demand has peaked, with some blaming President Donald Trump and others suggesting things will only worsen under a potential Joe Biden presidency, according to survey results the Dallas Federal Reserve Board released Wednesday.
The details: The latest Dallas Fed survey results paint a bleak picture of an oil and gas industry that has plummeted from a lofty perch it held six months ago as it angled toward record oil production of more than 13 million barrels a day, a trajectory thrown off course by the coronavirus pandemic’s dampening effect on commuters. Of 154 executives who responded to the survey, 66 percent said they believed oil demand has instead hit a peak. Companies were still cutting their investment budgets, though not as severely as they had been during the last quarter, the survey shows.
Domestic oil benchmark WTI would finish the year at around $43 a barrel, according to the average of survey results, up by only a dollar from the forecast made during the prior quarter. Nearly three-quarters of respondents said they believed OPEC “will play a bigger role” in determining oil prices.
The Dallas Fed covers Texas, northern Louisiana and southern New Mexico.
The context: Survey respondents said the economic paralysis brought about by the spread of Covid-19 was the major factor, with uncertainty over who will win this year’s presidential election further discouraging investment. One respondent told the Fed that “I am significantly more discouraged than in previous quarters due to the demonstrated lack of real concern and the lack of effective leadership by this president, his advisers and the Senate.”
Others voiced concern about what would happen if Biden and Democrats fared well in the election: “A Biden administration would absolutely kill our industry,” one respondent said, according to the survey results.
Others worried about the large-scale bankruptcies sweeping across the industry and what it would mean for the larger economy. “We believe strongly that banks and operators will have to face reality, which will lead to widespread bankruptcies and asset sales. Banks will likely recover less than 35 cents of each $1 loaned,” a third respondent said.
What’s next: OPEC members will hold their annual meeting at the end of November.