After two months of crude oil prices hovering around $60 a barrel,
companies are shutting down drilling rigs and laying off workers as they pare spending. It now appears very likely that U.S. oil production will not grow much this year, if at all.
There are two main reasons for low oil prices.
President Trump’s trade war is likely to slow the global economy, hurting demand for fuel. And OPEC Plus, an oil cartel led by Saudi Arabia, is increasing production of oil as demand is softening.
“We can’t run our program on hope,” Tom Jorden, chief executive of the oil and gas producer Coterra Energy, told analysts during an earnings call this month. “So we are battening down the hatches, expecting this to last for a while.”
The Houston-based company said it would drill less in the Permian Basin of Texas and New Mexico, the top U.S. oil field, and more in the Northeast, which is rich in natural gas. Prices for that fuel, used in power plants and for heating, have been much more resilient.
Lower oil production is the opposite of what Mr. Trump promised during his campaign, which frequently repeated the chant “Drill, baby, drill.”
The pullback means that production in U.S. shale basins, which generate most of the country’s oil, is likely to start declining later this year, according to the International Energy Agency, a Paris-based organization of industrialized countries including the United States.
The contraction could be swift if oil falls under $60 a barrel and remains there. For every dollar below that threshold, the I.E.A. estimates, five drilling rigs could be pulled out of U.S. fields. When companies drop rigs, workers often lose their jobs, hurting the economy of states like Texas.
What has remained consistent is that oil fetches much less than it did before Mr. Trump took office, when it was close to $80 a barrel. Then, most U.S. producers were earning healthy profits.
