Concerns over oil prices continue to shape a cautious and largely stagnant outlook for many US shale producers.
Survey results from the Federal Reserve Bank of Dallas released on 17 December show oil and gas activity in Texas and neighboring states slowing for a third consecutive quarter.
On average, executives from both the exploration and production (E&P) sector and the oilfield service sector said they expect US oil prices to be $62/bbl by the end of 2026. That compares with the average spot price of $59/bbl during the survey period, which ran from 3 to 11 December, and the $68/bbl price many respondents used in their 2025 budgets.
“The consensus view of lower oil prices hurts lenders and investors,” said one survey respondent. "The drumbeat that gasoline and crude oil prices are too high and inflationary fails to address the very small impact on consumers as well as the reality of the last 20 years’ real prices. Despite all of this, actual industry costs continue in one direction: up.”
When asked about capital spending plans, nearly 40% of respondents said they expect next year’s budgets to be either significantly or slightly lower, with responses split almost evenly between the two. About a quarter of E&P respondents said their 2026 budget would remain close to this year’s levels, while 36% said spending would increase slightly or significantly.
The pessimism tracks with a recent report from the US Energy Information Administration, which projects that slowing growth in the Permian Basin will pull US crude oil production down to an average of 13.5 million B/D in 2026, about 100,000 B/D lower than the 2025 average.
Another response highlighted the growing maturity of US shale plays, as operators increasingly move from so-called Tier 1 drilling locations toward Tier 2 and Tier 3 inventory.
“The secondary zones in the Permian have 15 to 20% less reserves by our observation,” the survey respondent said. “Make no mistake, these are economic locations, but we view secondary zones as unable to keep up with global crude oil demand in the next 5 years. Hence, why we are seeing larger independents make forays into Turkey, Argentina, and the like.”
On the outlook for upstream labor, 57% of executives said they plan to maintain their workforce at current levels next year, while another 23% said they expect to reduce headcount either slightly or significantly.
Lightweight proppants, which gained attention this year after ExxonMobil reported significant production uplift from its proprietary version, have so far seen limited uptake among other operators. Just 9% of the 34 E&P executives who answered the survey question said they had tested similar proppant technologies in the past 2 years, with another 12% planning trials in 2026.
While most respondents expect artificial intelligence (AI) to have a relatively modest impact on breakeven prices, some suggested the growth of AI data centers could have a larger effect on the business by pushing natural gas prices higher.
The survey shows that 38% of executives at large E&P firms, defined as producers with output above 10,000 B/D and accounting for 80% of total production among surveyed companies, expect AI to help cut breakeven costs by $0.01 to $1/bbl over the next 5 years. Another quarter of respondents at large E&Ps expect no reduction at all. Smaller E&Ps were more pessimistic about AI’s impact, with 70% saying they expect no breakeven reductions from the technology.
“AI has helped reduce our effective well costs, not through a single measurable dollar impact, but through broad productivity gains across our office,” said a respondent from an E&P firm. “Employees complete tasks more quickly, avoid overlooked items through AI reminders, and use AI to review documents when time is limited. These incremental improvements make our operations more efficient and ultimately lower our aggregate cost of drilling a well.”
Others noted that while AI data centers are providing support for US natural gas prices, which have rallied in recent weeks, they are also competing for a larger share of the nation’s electricity supply.
One respondent stressed the need to strike a balance between AI-driven growth and affordable energy, saying, “The rapid expansion of AI and data center infrastructure is driving significant economic growth, but it is also creating substantial additional power demand that current generation plans do not appear prepared to meet.”
The respondent added that unless electricity supply expands, higher power costs will ultimately be passed on to consumers, potentially reducing spending elsewhere in the economy and weighing on overall US economic growth.
Others pointed to trade policies under President Donald Trump’s administration as helping attract foreign investment to the US, which they said would increase demand for US liquefied natural gas (LNG) as countries seek to offset trade deficits.
The survey also captured concerns about geopolitical uncertainty, including discussions around a potential peace plan between Ukraine and Russia. Some respondents said an end to the nearly 4-year-long war could weigh on prices by contributing to a surplus of global crude supply and could also affect US LNG exports.
“However, if sanctions on Russia remain in place, along with reduced oil volumes from Iran and Venezuela, markets may move closer to balance. This leads us to forecast oil prices between $45 and $60[/bbl] for most of 2026,” one anonymous E&P respondent said.
Responses from US service firms revealed that they share some of the same concerns with one saying that activity levels have remained flat over the past few months as “it currently it feels like operators are waiting to see how oil prices trend, with a large amount of uncertainty coming from the global geopolitical stage.”
The quarterly survey includes input from 90 oil and gas firms and 41 oilfield service companies located in Texas, northern Louisiana, and southern New Mexico.
