'Much excess capacity and weak demand for energy services'

From the Federal Reserve’s latest Beige Book, summarizing comments received from business and other contacts outside the Fed at its 12 district banks on July 29:

“With oil prices up to $70/bbl in the first half of 2009 but recently trending down, oil production was reportedly flat in June and early July in the Cleveland, Minneapolis, and Kansas City districts and up slightly in Dallas and San Francisco.

“Contacts in Atlanta indicate that the number of rigs operating in the Gulf of Mexico had fallen by half year over year, while in Dallas the number of working rigs was up slightly.

“Natural gas prices continue to fall, discouraging drilling in the Kansas City, Dallas, and San Francisco districts.

“Kansas City energy producers report financial strains and are cutting headcounts selectively, while contacts in Dallas observe much excess capacity and weak demand for energy services.”

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