Shale Bosses Lament Iran War 'Chaos' Engulfing Oil Market

(Bloomberg) -- Despite higher oil prices, US shale executives are complaining that the market volatility arising from the conflict in the Middle East isn't making their job any easier.

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In a series of anonymous comments published Thursday from a report released by the Federal Reserve Bank of Dallas, energy executives cited chronic uncertainty over the outcome of the war and its effect on supply and demand. Some of the people, who were respondents in a survey carried out by the bank, criticized what they characterized as the inability of President Donald Trump to explain the rationale behind the conflict.

"If the administration feels that we need to prolong the conflict, it needs to better articulate the long-term strategic goal and the risk of inaction," one respondent was quoted as saying. "This cannot be solely about barrels."

The bank, which typically conducts a quarterly survey of energy firms in Texas, northern Louisiana and southern New Mexico, took the unusual step of asking additional questions following the publication of the first quarter survey in March. The updated responses come at a time of high volatility in energy prices amid the conflict in the Middle East. The insights, published days before the Fed's April meeting, will give policymakers a fresh look into a rapidly evolving market.

West Texas Intermediate, the US benchmark for oil, has climbed by more than a third since the US-Israel war with Iran began in late February. Although US drillers are generally expected to ramp up output in response to the price spike, the largest publicly traded oil companies have yet to announce any updates to drilling plans. Some in the shale patch have expressed concern with the mixed signals that future oil prices are giving the market.

"The difference between the gyration of paper market oil prices versus what seems to be substantially higher physical prices sends conflicting signals to operators who cannot plan rigs and capital budgets when prices swing wildly based on tweets," one respondent said.

While higher oil prices had raised expectations that energy companies would increase production in the US, bolstering employment in that sector at least, most executives said in the latest survey they expect to keep employment steady or increase it only slightly this year. That's unwelcome news, since the drag on all other forms of consumer spending created by higher fuel costs could threaten jobs outside the energy sector.