Dallas Fed Q4 2025 Energy Survey: U.S. Oil and Gas Activity Edges Lower Amid Price Pressures and Geopolitical Concerns

On December 17, 2025, the Federal Reserve Bank of Dallas released its quarterly energy survey, covering key U.S. oil and gas producing states (Texas, Louisiana, New Mexico). The survey indicated that sector activity edged lower in Q4 2025, driven by executive concerns over weak oil prices (rendering some wells uneconomic) and ongoing geopolitical uncertainty [1]. The Energy sector underperformed the broader market on the survey’s release date, declining by -0.07271% [0].

Market conditions supporting these concerns include the U.S. Energy Information Administration’s (EIA) December 2025 forecast of Brent crude oil averaging $69 per barrel in 2025 and dropping to $55 per barrel in 2026 due to projected global inventory builds [3]. The International Energy Agency (IEA) has also projected a record global oil surplus of 4.0 million barrels per day for 2026 [2]. Weak Chinese economic news and demand concerns pushed crude oil prices to a 1.75-month low on December 15, 2025 [2]. In response, OPEC+ announced a pause in production increases for Q1 2026 to address the emerging surplus [2].

1. U.S. Shale Region Sensitivity to Global Price Dynamics
   : The decline in activity in Texas, Louisiana, and New Mexico highlights the U.S. shale sector’s direct vulnerability to global oil price fluctuations and demand trends.
2. Cost Curve Bifurcation
   : The low-price environment is expected to widen the gap between larger, efficient producers with lower breakeven points and smaller, higher-cost operators, potentially leading to industry consolidation.
3. Regional Economic Implications
   : The energy sector is a critical driver for the economies of Texas, Louisiana, and New Mexico, so sustained activity declines could have broader regional economic impacts.
4. Limits of OPEC+ Actions
   : While OPEC+ has paused production increases, its ability to offset the projected 2026 global surplus remains uncertain, as the surplus is driven by both supply and demand factors.

• Sustained Low Oil Prices
  : Continued price weakness could squeeze margins for high-cost producers, leading to asset write-downs or well closures.
• Global Demand Slowdown
  : Weak economic data from China and other major economies raises concerns about future energy demand.
• Geopolitical Volatility
  : Unspecified geopolitical uncertainties could create additional supply and demand volatility.
• Record Surplus Projection
  : The IEA’s 4.0 million barrels per day surplus forecast for 2026 may keep prices suppressed.

• Asset Acquisition for Efficient Producers
  : Stronger, lower-cost producers may find opportunities to acquire distressed assets from struggling operators.
• Capital Discipline
  : Focus on cost optimization and operational efficiency could strengthen long-term resilience for producers who navigate the current environment successfully.

The Dallas Fed’s Q4 2025 survey reveals a cautious outlook for U.S. oil and gas activity in major producing states, driven by weak prices, surplus projections, and geopolitical uncertainty. Stakeholders should note:

• Executives need to prioritize cost optimization and strategic asset management to maintain profitability.
• Investors should monitor producer cost structures, balance sheet health, and exposure to high-margin assets.
• Policymakers may need to consider measures supporting regional energy sector stability and transition-compatible production.
• The sector’s performance will depend on how well producers adapt to the projected low-price environment and whether OPEC+ actions can stabilize market conditions.