US oil, gas activity rose in first quarter, but energy execs wary of tariffs, Dallas Fed says

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U.S. oil and gas activity increased slightly in first quarter

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Tariffs drove uncertainty and pessimism in Dallas Fed survey

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Companies wary of low oil prices, rising costs to drill

(New throughout, adds comments from executives in survey)

By Curtis Williams and Georgina McCartney

HOUSTON, March 26 (Reuters) -

U.S. oil and gas activity increased slightly in the first quarter, but energy company executives were pessimistic about the sector's outlook, wary of new trade policies from President Donald Trump's administration, a Dallas Fed survey showed on Wednesday.

Trump has promised to unleash U.S. energy dominance, declaring a national energy emergency on his first day in office. Yet many executives surveyed by the Dallas Fed expressed worries about Trump's promise to drive down oil prices, and said his trade and tariff policies could raise drilling costs.

Trump imposed

tariffs on steel and aluminum

on March 12 and more tariffs could be coming on April 2. Oil industry executives said tariffs could drive up oil company costs for products like steel used on drilling sites and in pipelines.

The imposition of the 25% steel tariff has led oil and gas companies to estimate a 4% increase in costs for drilling a well, said Kunal Patel, economist at the Federal Reserve Bank of Dallas.

"In a strange twist to the administration's hope for more domestic oil and gas production, higher steel tariffs may result in fewer wells completed due to higher completion costs," said one oilfield services executive in an anonymous survey.

"The administration's chaos is a disaster for the commodity markets. 'Drill, baby, drill' is nothing short of a myth and populist rallying cry. Tariff policy is impossible for us to predict and doesn't have a clear goal. We want more stability," said another executive.

The company outlook index decreased 12 points to -4.9, suggesting slight pessimism among firms, the Dallas Fed survey said. The uncertainty index was up by 21 points to 43.1.

"This uncertainty is being caused by the conflicting messages coming from the new administration. There cannot be 'U.S. energy dominance' and $50 per barrel oil; those two statements are contradictory," another unnamed executive said.

The survey, conducted in mid-March, included 88 exploration and production companies and 42 oilfield firms operating in the largest U.S. oil-producing region that includes Texas, southern New Mexico and northern Louisiana.

TARIFF TROUBLES

More than half of the oilfield service firm executives polled said Trump's import tariffs on steel will lead to a drop in demand for their services this year.

One executive said the tariffs immediately increased its company's costs for casing and tubing by 25%.

Costs among oilfield service firms rose faster in the first quarter of 2025 than in the fourth quarter of 2024, the survey showed.

"Oil prices have decreased while operating costs have continued to increase. To stimulate new activity, oil prices need to be in the $75-$80 per barrel range," said one executive in the survey.

Companies expect a West Texas Intermediate (WTI) oil price of $68 per barrel by the end of 2025, rising to $74 per barrel in 2027 and $82 per barrel by 2030. U.S. crude futures are currently trading at around $70 a barrel.

Oil and gas companies expect natural gas prices to be $3.78 per million British thermal units (MMBtu) at the end of the year, rising to $4.30 per MMBtu in 2027 and $4.83 per MMBtu in five years. (Reporting by Curtis Williams and Georgina McCartney in Houston; Editing by David Gregorio and Liz Hampton)