Uncertainty Continues to Weigh on Oil and Gas Activity

Oil and gas activity softened again in the fourth quarter of 2025, as uncertainty and cautious sentiment continued to shape decision-making across the sector. According to the latest Dallas Fed Energy Survey, executives described a market that appears stable on the surface but remains weighed down by lingering pessimism.

The survey’s broadest measure, the business activity index, remained in negative territory at -6.2, nearly unchanged from the previous quarter. That steady reading suggests conditions haven’t worsened dramatically, but they also haven’t meaningfully improved. The same tone showed up in company outlooks. While the outlook index edged slightly higher, it stayed firmly negative at -15.2, reinforcing the sense that confidence remains fragile. Uncertainty also stayed elevated, with the outlook index holding near 43.

Production trends offered a mixed picture. Oil output was mostly flat, though the oil production index improved modestly, moving closer to zero. Natural gas production showed a slightly brighter signal, rising to a neutral reading after being negative in the prior quarter. Together, the data point to steady operations rather than growth, as producers remain hesitant to push activity higher.

Cost pressures, while still present, eased somewhat compared with earlier in the year. Oilfield services firms reported slower increases in input costs, and exploration and production firms saw declines across finding, development, and lease operating expense indexes. Even so, services firms continued to feel the strain. Equipment utilization stayed weak, operating margins remained deeply negative, and prices received for services slipped further, highlighting continued pressure across the service side of the market.

Labor conditions also softened. Employment demand declined more sharply in the fourth quarter, and employee hours fell alongside it. While wages and benefits continued to rise, the pace slowed, reflecting a more cautious approach to staffing as firms navigate uncertain market signals.

Looking ahead, executives shared relatively conservative price expectations. On average, respondents expect WTI crude to reach $62 per barrel by the end of 2026, with longer-term expectations gradually rising to $75 five years out. Natural gas prices are expected to average $4.19 per MMBtu by year-end 2026, climbing modestly in the years that follow. These forecasts sit close to recent spot prices, reinforcing the idea that firms are planning around stability, not sharp rebounds.

The survey also included special questions this quarter, touching on 2026 capital spending plans, budgeting assumptions, workforce levels, and the potential role of artificial intelligence in lowering well break evens. Additional topics included changes in completion techniques, interest in power-related services, and whether producers plan to target gas-heavy wells; signs that firms are evaluating efficiency and diversification rather than expansion.

Overall, the fourth-quarter results paint a familiar picture: steady production, easing cost pressures, cautious hiring, and limited optimism. With uncertainty still high and outlooks subdued, many oil and gas firms appear focused on discipline and resilience as they head into 2026.