There were mixed signs Friday for Louisiana’s struggling energy industry as slumping oil prices sunk the U.S. rig count to a record low.
One hope was a declaration by the International Energy Agency that there are signs emerging of a market that has “bottomed out.” U.S. crude prices jumped to $38.50 a barrel on Friday, a high for the year, and production cutbacks may finally be translating into a reduction in the global oversupply of oil, the Paris-based agency for oil-consuming nations said.
The bottoming has come at price: Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged to about $26 per barrel just a month ago from well over $100 per barrel two years ago.
The latest is Texas driller Anadarko Petroleum Corp., which said Friday that it would cut 1,000 workers, 17 percent of its workforce.
Oilfield services company Baker Hughes in Houston reported that 480 rigs were exploring for oil and natural gas nationally this week, dropping nine from the previous week to crack a 1999 low of 488. Less than half the 1,125 rigs that were busy a year ago are still active.
Louisiana’s working rig total has hit “historic lows,” worse than in the aftermath of the 1980s oil bust, said Don Briggs, president of the Louisiana Oil and Gas Association. “There’s just very little work going on,” he said. “You can’t drill these wells and produce below your cost with these prices like they are.”
Louisiana, though up three rigs for the week, is averaging only 50 this year, compared with 77 for 2015 and the 111 rigs that were active in 2014 when oil prices started tumbling.
Depressed oil prices have hampered fracking operations in oil formations across the country, hitting the fledgling Tuscaloosa Marine Shale that stretches from Texas across the middle of Louisiana into Mississippi. Hard-to-reach reserves there can be costly to extract.
Drilling already had slowed in the once-promising Haynesville Shale natural gas formation in northwest Louisiana, which petered out in 2012 as production sliced the price of natural gas from a high of $13 per thousand cubic feet to less than $2. The Haynesville had 15 rigs working last week, 23 less than a year ago.
Last week, 24 rigs were working in the Gulf of Mexico, 25 less than a year ago.
As work has slowed, domestic oil production has followed suit: Federal forecasters pegged last month’s production as averaging 9.1 million barrels per day, about 80,000 barrels less than the previous month. That’s down sharply from last year’s 9.4 million barrels per day average, according to the U.S. Energy Information Administration.
U.S. production is expected to average 8.7 million barrels in 2016 and 8.2 million barrels next year, federal forecasters said this week. Experts say it won’t be enough to dig out of the latest downturn.
“The U.S. can’t single-handedly shut down enough stuff to make the oil price go up through the roof,” said Eric Smith, associate director of the Tulane Energy Institute.
The International Energy Agency said Friday that OPEC production tumbled by 90,000 barrels a day last month.
“The market is banking on these continuing decreases to start having production impacts. The problem is that they’re relatively low and slow coming,” said David Dismukes, executive director of LSU’s Center for Energy Studies. “While the rig counts are important, the production numbers are equally important.”
Despite waning production, inventories have reached record highs in Cushing, Oklahoma, a major oil storage center, according to Genscape, a data analysis and energy industry monitoring firm.
The U.S. Energy Information Administration predicts per-barrel prices to average $34 in 2016 and $40 in 2017 — estimates that were cut back since last month because of higher-than-expected production and weak demand.
“We’re reaching close to the bottom of the oil prices, but it’s climbing back is what’s going to be difficult,” Briggs said.
Follow Richard Thompson on Twitter, @rthompsonMSY.