Oil, gas industry closes a lackluster year
ENERGY: 2019 ends on mixed notes with drops in rigs, drilling, inventories
The oil and natural gas industry is ending the year on mixed notes, with three recent indicators painting an uninspiring picture of a lackluster year as the sector heads into the next decade.
With the number of U.S. oil and gas drilling rigs continuing to fall, drilling activity remains anemic while new figures from the Federal Reserve Bank of Dallas’ energy survey show that the Texas oil and gas industry contracted in the fourth quarter.
At the same time, the nation’s crude oil inventories
dipped last week, typically a bullish sign for the market because it indicates higher demand for oil and is considered to be a precursor of higher commodity prices. U.S. commercial crude oil inventories stood at just above 441 million barrels last week, a modest decrease of 5.5 million barrels from a week prior, according to the U.S. Energy Department.
U.S. refineries, operating at 93.3 percent capacity for the week ended Dec. 20, increased production of gasoline, diesel and other products as more Americans drove and flew for the holiday season, boosting demand. Refineries processed an average of 17 million barrels of crude oil per day last week, an increase of 419,000 barrels per day on average from the previous week. Crude oil inventories are about 2 percent above the five-year average for this time of year.
Despite the bump from the inventories report, oil prices were little changed on Friday. West Texas Intermediate crude edged 4 cents higher, settling at $61.72 per barrel.
Sluggish commodity prices, lackluster enthusiasm from investors, and concerns that global demand for refined products will wane next year have put pressure on U.S. energy companies to cut back through the latter half of 2019.
The U.S. rig count has plunged by more than 25 percent in the last 12 months due to the slowdown. This week, the number of U.S. oil and gas drilling rigs fell by eight, resuming its decline after jumping by 14 last week, according to the Baker Hughes rig count. The nation now has 805 oil and gas rigs operating, more than 270 fewer than at the same time last year.
The Permian Basin of West Texas, the nation’s largest and busiest oil field, led rig count declines this week, losing a net nine rigs.
Business conditions in the nation’s oil fields are still constrained, according to a monthly energy survey by the Dallas Fed, which surveys oil and gas executives in Texas, northern Louisiana and southern New Mexico. Operating margins for oilfield service companies in particular are becoming thinner, and 41 percent of energy firms surveyed expect to decrease capital spending in 2020.