DENVER (Reuters) – Oil production activity across U.S. Great Plains and Rocky Mountain states rose moderately last quarter, marking the first year-on-year increase since 2019, according to a report on Friday by the Federal Reserve Bank of Kansas City.
The uptick comes as oil prices recover after the coronavirus pandemic crushed activity and battered the industry. U.S. crude futures traded around $59.30 a barrel on Friday, up from as low as $22.57 a year ago.
Energy firms surveyed by the Kansas City Fed said crude oil prices would need to average around $53 a barrel for drilling to be profitable. The Kansas City Fed’s territory includes oil-producing states Colorado, Oklahoma, Wyoming and parts of New Mexico.
Expectations rose in the first quarter, the report said, with a future drilling and business activity index up to 40, versus 26 in the fourth quarter of 2020. Some 61% of firms surveyed also indicated that financing had become more available.
While indexes showed expectations for growth in activity, comments from energy executives were less bullish.
“It appears that U.S. shale producers are less likely to immediately respond with increased drilling/completion rates when oil price increases provide them with increased cashflow,” said one executive.
Another warned that “a more cautious approach to growth will be the focus” over the next one to two years as demand recovers.
Comments by energy executives also pointed to shifts in labor trends within the industry.
One said full-time employment would remain depressed and be replaced by contract or part-time workers. Another said it had been difficult to find “appropriately skilled labor” as employees exit the industry.