A new report from the Dallas Federal Reserve found that oil and gas business activity grew in the third quarter but uncertainty over commodity prices remains.

Oil and gas executives surveyed by the Dallas Fed reported an increase in business activity during the third quarter.

The report, published on Wednesday, found that the business activity index for energy firms in the Eleventh District strengthened to 26.7 compared to 13.8 in the second quarter.

Despite the activity boost, the Dallas Fed said that several indicators remained in “contractionary territory.”

The Dallas Fed said that, while activity levels and outlooks improved, its most recent survey shows “persistent weakness” in oil and gas employment and production.

Exploration and production firms surveyed by the Dallas Fed reported a fall in oil and gas production during the third quarter.

That decline marked the third consecutive quarter that oil and gas production levels in the Eleventh District have fallen, although the rate of the decline did slow compared to previous quarters.

The oil production index was at -10.2 for the third quarter, up from -19.7 in the second quarter. 

The natural gas production index was -20.6, up from -24.7 in the previous quarter.

Among oil and gas support services firms, the equipment utilization index surged 25 points to a 24.1 reading in the third quarter.

However, prices received for services declined again in the third quarter, with the corresponding index coming in at -23.4 reading. 

Labor market indicators contracted on net during the third quarter, although the majority of firms reported no changes in jobs, hours or wages, the report said.

The employment index remained negative but advanced to -6.5, with 13 percent of firms reporting net hiring and 20 percent reporting net layoffs.

The employee hours index and the wages and benefits index also increased in the third quarter.

However, the employee hours index remained in negative territory at -1.9 while the wages and benefits index hit -9.7 during the quarter.

The Dallas Fed reported an expansion of capital spending in the third quarter, with the corresponding index coming in at 11.4, up substantially from a reading of-9.3 in the second quarter.

The index of expected E&P capital spending in 2017 remained in positive territory at a 21.8 reading.

The Dallas Fed said the six-month outlook “improved” with the corresponding index coming in at a 19.6 reading, up slightly from 19.0 in the previous quarter.

The company outlook index for E&P firms came in at 29.5 while the outlook index for support service firms came in at an 11.2 reading.

The Dallas Fed said respondents to its survey “continue to be bullish about oil and natural gas prices one-year ahead.”

The report found that nearly 62 percent of respondents expect oil prices to increase and 48 percent expect natural gas prices to increase.

The Dallas Fed added that comments from respondents “suggest some increased uncertainty, though, with several raising concerns about continued oversupply and recent oil price weakness.”


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