Oil settles over $60 on hopes of deal

Crude oil prices settled above $60 a barrel for the first time in three months, buoyed by the Trump administration’s trade deal with China just a week after OPEC and its allies approved deeper production cuts to head off another supply glut.

But the oil and gas industry, which has struggled through most of the year with lackluster prices and limited access to capital, still faces challenges ahead. The International Energy Agency, which advises industrialized nations on energy, reported earlier this week that global oil markets still face a surplus of crude next year, even if the Organization of the Petroleum Exporting Countries, Russia and other members of the OPEC+ group carry through on their production cuts that will deepen to a combined 1.7 million barrels a day from 1.2 million barrels a day.

The Norwegian research firm Rystad Energy projected Friday that modest oil prices should persist through next year, leading global spending by oil and gas producers to fall by 4 percent. The cuts will be even deeper for North American shale drillers.

Rystad estimates that exploration and production spending on North American shale will plunge by 12 percent next year, marking the second consecutive year of declining investment in oil and gas projects.

For much of this year, oil has traded between $50 and $60 a barrel, a level at which only some companies can make money — and not a lot. Investors and lenders, unhappy with returns, have pulled back from energy, leaving companies to finance their operations and expansions primarily with the cash they generate and forcing many to cut back. The number of operating drilling rigs in the United States has plunged by 25 percent to the lowest level since March 2017, when the industry was just climbing out of the last oil bust.

The Houston oil field services company Baker Hughes reported Friday that the U.S. rig count was unchanged from a week ago, at 799.

Crude on Friday settled at $60.07 a barrel in New York, the first time oil broke $60 a barrel since the September attack on a major Saudi Arabian oil facility. Last week’s OPEC deal helped push oil near the $60 threshold, and the limited trade deal reached by China and the Trump administration pushed prices just past it.

But analysts say for oil and gas companies to start increasing spending, prices would need to climb well about $60 a barrel and stay there for an extended period.

While shale will see spending cuts, not all segments will experience declining investment next year, according to Rystad. Spending on deepwater projects is expected to grow by 5 percent next year, a relative boom for the offshore industry, which has struggled to recover from the la5st oil bust. Chevron, for example, said this week it would move forward with a $5.7 billion development in the deepwater Gulf of Mexico, about 140 miles off the Louisiana coast.