Dallas Fed sees more shale operators restarting idled oil wells

HOUSTON (Bloomberg) --More than a third of shale explorers polled by the Federal Reserve Bank of Dallas say they’ll restart most of their idled output by the end of this month, ending production curtailments made during the crash in oil prices earlier this year.

All told, more than half of the 56 executives who participated told the bank the taps will be turned back on by the end of July, according to the latest quarterly Dallas Fed Energy Survey released Wednesday.

The survey gives some insight into how the beleaguered shale sector is responding to a recent uptick in prices, with benchmark West Texas Intermediate prices closing this week at above $40 per barrel for the first time since March. In April, prices dropped below $20 and briefly went negative amid almost demand destruction and oversupply caused by the Covid-19 pandemic.

Despite the limited recovery in prices, the U.S. oil industry is still suffering. According to the Dallas Fed report, 80% of executives surveyed expect U.S. drilling and fracking won’t return to pre-Covid levels until at least next year; another 16% don’t expect the industry to ever return to the same workload again.

During the second quarter, oilfield activity in Texas and parts of Louisiana and New Mexico -- the region covered by the bank -- dropped to its lowest level in the survey’s four-year history.

“It was dismal during the ‘lockdown,’” an unnamed respondent said in the survey. “It will be quite a while (2022+) to get back up the hole to the pre-COVID-19 level of activity and service pricing.”