The Dallas Federal Reserve's Latest Data Reveals The Oil Business Activity Index

In the fourth quarter, U.S. drilling activity continued to fall, and the sense of doom among shale drillers remained palpable throughout Texas. The Dallas Federal Reserve's latest data reveals that the business activity index–a large indicator that measures conditions in Texas' energy sector–remains in negative territory, but marginally narrowed from a third-quarter reading of-7.4 to -4.2 in the fourth. Oil production companies are striving hard to get out of the recession, but this means a sharp decline in the service firms output. A reading of -22.1 was seen in the operation reading for the oilfield services group. Specifically, E&P firms have seen modest growth, with the index rising in the fourth quarter from zero to 5.4. But a third consecutive negative reading was reported by employment.

The Dallas Fed Energy Survey provides information on a treasure trove. The quarterly report poses a number of questions that are answered directly by oil and gas executives, enabling them to speak frankly. The survey hit 170 companies, of which 111 were E&Ps, and 59 were oilfield services firms. As just that, it provides a kind of unvarnished feeling gage, although it should be noted that a handful of oil majors are an increasingly high portion of production that is not reported in the survey.