WASHINGTON — Fast-falling oil prices are threatening to crash Texas’ oil and gas industry and damage Houston’s energy-centric economy as the coronavirus outbreak slows global economic growth and the demand for petroleum.

With no signs of a rebound in clear sight, oil analysts are bracing for a potential repeat of the 2014 oil bust, which sent oil prices falling more than 70 percent to less than $30 a barrel. The Organization of Petroleum Exporting Countries is set to meet next week to discuss further cuts to production to try to lift prices.

“No one can really quantify this, but given the magnitude of the demand shock because of the spread of this contagion, it’s unclear what amount of oil OPEC can take off the market to insulate oil prices,” said Bill Herbert, managing director at Simmons Energy in Houston. “I don’t think anybody has a clue to where THE price is going.”

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A continued and sustained drop in crude prices would have serious ramifications for Houston, which serves as the corporate and engineering hub of the nation’s oil sector. If oil prices continue to stay low, layoffs will follow, not only from oil companies but across the wider economy, said Bill Gilmer, director of the Institute for Regional Forecasting at the University of Houston.

“I already lowered my jobs projection, and I’m afraid I’m going to have to do it again,” Gilmer said. “The economy here isn’t any less susceptible to oil prices than it was in 1990. It’s a huge part of our economy, probably almost 200,000 people directly employed. And they are some of the best-paid jobs.”

Crude fell 5 percent Friday in New York trading, capping its worst week since the 2008 financial crisis. Oil settled at $44.76 a barrel, down 16 percent over the last week and 27 percent since the beginning of the year.

‘More negative than positive’

The price drop comes at a perilous time for the Texas oil sector, following years of relatively low prices that have forced many companies to cut back or leave the business all together. Last year, the state’s energy sector cut nearly 10,000 jobs, according to the Labor Department.

Wall Street investors, long willing to support the industry with cheap capital, have pulled back and demanded executives focus on generating cash and investor dividends, not on drilling more wells. At the same time, financial institutions are growing increasingly wary of the industry’s contribution to climate change and the resulting public backlash, adding to their reluctance to invest in oil and gas. The New York financial services giant JPMorgan Chase recently said it would no longer finance drilling in the Arctic.

In Midland, at the heart of West Texas’ Permian Basin, oil executives expect to see more drilling rigs shut down as many companies, struggling with high debt, face increasing pressure from their financial backers to cut costs The number of operating drilling rigs in the United States has plunged more than 20 percent from a year ago to fewer than 800 rigs, according to the Houston oil field services company Baker Hughes, the lowest level since March 2017, when the sector was just recovering from the last oil bust.

“A number of them have rigs running, but a lot of them will be pulled back. They’ll drop those rigs when the contracts are up,” said Larry Oldham, a Midland investor and board member of the private equity firm Mountain Capital LP. “It’s the perfect storm in what we’re seeing right now. I don’t want to call it a death spiral, but there’s more negative than positive.”

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The Texas oil industry has boomed in recent years with production growing like clockwork, climbing above 13 million barrels a day and surpassing that of both Saudi Arabia and Russia. But data released Friday showed oil production in the continental United States is slowing, increasing at a rate of about 750,000 barrels a day, less than half of the rate during the second half of 2018.

Even before coronavirus began roiling financial markets, there was little good news coming out of the oil sector as prices spent much of 2019 stuck between $50 and $60 a barrel — around the break-even point for many producers. The latest earnings season, which captures the fourth quarter as well as all of 2019, has been glum.

Oil field services companies such as Schlumberger and Halliburton of Houston cut the value of assets by billions of dollars after pulling drilling and fracking crews from shale fields and reported steep losses. Schlumberger alone said it lost $10 billion in 2019.

Big Oil, too

U.S. oil majors Exxon Mobil and Chevron also reported disappointing earnings, hit by lackluster prices not only for oil but also for natural gas and chemicals. Exxon’s annual profits fell by more than 30 percent last year while Chevron’s plunged 80 percent, dragged down by a $6.6 billion loss in the fourth quarter.

On Friday, the Houston company Occidental Petroleum said it lost $965 million in 2019 as it absorbed the costs of its takeover of Anadarko Petroleum. CEO Vicki Hollub told analysts that the company was ready to cut both costs and production if oil prices continue to slide.

“We don’t know how long this coronavirus will last,” she said. “We are prepared to reduce our spending if the current environment does not improve.”

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Paul Takahashi and Bloomberg News contributed to this report.

james.osborne@chron.com

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