For American drillers, the New Year will likely bring more of the same – financial pressure and mass layoffs.
The U.S. petroleum industry hasn’t seen this many bankruptcies in one quarter since the Great Recession, the Federal Reserve Bank of Dallas says, counting nine Chapter 11 court filings in the year’s final three-month period. And that’s just a third of the year’s domestic casualty count.
The Dallas Fed also estimates in a new report on Thursday the nation has lost about 70,000 oil and gas jobs since October 2014, a 14.5 percent drop in the 14 months after the domestic shale drilling boom that drew thousands to Houston’s oil hub began a steep decline.
But the sacrifice of dozens of U.S. oil producers, thousands of oil field workers and more than 1,200 drilling rigs still hasn’t stalled U.S. crude production enough to shrink the global oil glut that has sent oil prices below $40 a barrel.
Global crude supplies, the Fed said, could outpace demand by 600,000 barrels a day, and the world’s crude storage tanks may not start to decline until 2017.
That’s in part because increased production from Iran has come on earlier than anticipated and the Organization of the Petroleum Exporting Countries is expected to continue pumping crude at current levels.
Iran, which expects western sanctions on its oil exports to be eased next year, has said it wants to pump an additional 500,000 barrels a day. Goldman Sachs believes that OPEC, which includes Iran, will boost its daily production in 2016 by 640,000 barrels. But that’s a conservative estimate that assumes Iran will only put out 285,000 barrels a day next year.
Meanwhile, U.S. output has fallen more slowly than expected, with production declines leveling out in recent weeks, according to the U.S. Energy Information Administration, as the market absorbs crude production from drilling activity that happened early last summer, when oil prices were $60 a barrel.
Big-ticket oil projects coming into production in the Gulf of Mexico boosted U.S. supplies by 500,000 barrels a day from July to September, which tempered the decline in the nation’s shale plays.
“Given the great uncertainty surrounding projections and the timing of supply and demand changes, the coming year promises to be a dynamic one for the oil markets,” the Fed said.
U.S. crude rose 53 cents in early trading Thursday to $38.03 a barrel on the New York Mercantile Exchange, climbing 12 percent since the market reached a rock-bottom low a few days ago. Brent, the international benchmark, increased 30 cents to $37.66 a barrel on the ICE Futures Europe.
