Crude oil prices took a steep dive Wednesday, falling to new five-year lows and fueling fresh speculation about energy job cuts, further price reductions and damage to the Houston-area economy.

A slew of factors - including decreased demand projections and tough words from a Middle East official - contributed to a $2.88 drop in U.S. benchmark oil prices to $60.94 per barrel. Brent, the international standard, was down $2.60 to $64.24 per barrel.

On the same day, a pair of Houston-based shale producers said they would slash their 2015 capital spending budgets nearly in half and BP revealed it would accelerate previously planned job cuts.

"You're going to see layoffs in the oil industry," said Morgan Downey, a New York-based commodities trader and author of the book Oil 101. "Basically, the oil industry is going to go into shut-in mode. It's already starting to."

Crude prices tumbled as the Organization of the Petroleum Exporting Countries predicted that next year's projected demand for its crude would fall to 28.9 million barrels of oil per day - more than 1 million barrels less than what it was producing last month, according to its estimates.

Then, Saudi Arabia's oil minister Ali Al-Naimi brushed off questions from journalists about the possibility of his country cutting production to boost prices. "Why should I cut production?" Al-Naimi said, according to Bloomberg. "This is a market, and I'm selling in a market. Why should I cut?"

"Its's another sign of the OPEC price war," said Phil Flynn, a senior market analyst at the Price Futures Group in Chicago. "It's a signal they're digging in their heels."

At home, the U.S. Department of Energy published data Wednesday showing that U.S. commercial crude oil inventories increased by 1.5 million barrels last week, when analysts had expected a decline.

How far can crude fall?

At this point, experts say, it's unclear how low crude prices will fall - but they're unlikely to rise any time soon. "Is it going to settle at $60? Is it going to settle at $50? I don't know," said Bud Weinstein, associate director of Southern Methodist University's Maguire Energy Institute. "It's going to take a while to see any stability in price."

Oil companies aren't waiting for the situation to settle. They are acting now.

BP revealed plans Wednesday to accelerate its job cuts as it announced $1 billion in restructuring charges it plans to take next year. Those costs would likely come mainly from employee severance packages, said Robert Nichols, a partner at Houston law firm Bracewell & Giuliani who assists oil and gas companies in restructuring efforts. The plan would deepen $32 billion in asset sales and cuts the British oil giant has already made to its oil production business since last year, and would bolster layoffs that have occurred. The layoffs have previously targeted midlevel managers and back-office corporate employees.

The firm, which has its main U.S. offices in Houston, didn't say how many employees it would lay off or where, but said lower oil prices may prompt the company consider bigger spending reductions than it previously projected.

Oasis Petroleum said it would slash its capital budget nearly in half from $1.4 billion to as low as $750 million. The company primarily operates in North Dakota and Montana. And Goodrich Petroleum, which focuses on the Eagle Ford and Tuscaloosa Marine Shale in Louisiana and Mississippi, said it would cut its capital budget from $375 million to $150 million to $200 million next year.

"A lot of these companies are looking at 2015 as a year to play defense, preserve their liquidity and drill in their best areas," said David Deckelbaum, analyst at KeyBanc Capital Markets.

Deeper cuts possible

Some companies have been buffered against the price storm, to an extent, because they locked in deals to sell some of their oil at prices next year that are much higher than prices today, Deckelbaum said. But those hedges aren't in place for 2016, and if crude continues plunge in the coming months, companies may be forced to make deeper cuts.

The moves follow earlier announcements of much larger companies - including Apache Corp., ConocoPhillips and Schlumberger - to pare spending.

Next year's industry downturn is almost certainly going to spark a wave of layoffs, hiring freezes and corporate mergers between oil field service companies and oil producers, Nichols said. Big acquisitions mean oil companies are "able to reduce costs, which generally means letting people go," he added.

Wednesday's crude price slide lead to declines across energy stocks. And overall, the S&P 500 dropped 33.68 points to close at 2,026, while the Dow Jones Industrial Average fell 268 points to close at 17,533.

Shale drillers are able to respond quickly to crude price fluctuations, and there's already evidence that they're slowing down activity based on recent declines in drilling permits, Downey said, adding: "I have this feeling that this can be the fastest shut-in process in history."

He expects crude oil prices to bounce between $60 and $80 over six months to a year - or longer - as shale drillers start and stop activity. "They're very nimble," he said, adding that barring a major world event, it would be unlikely for crude oil prices to rise above $80 any time in the next year.

Meanwhile, experts say they don't expect OPEC to reverse course and cut production any time soon, since Saudi Arabia dominates the cartel, and it has the financial reserves to weather low prices. Though the group might convene before its next regularly scheduled meeting in June, it's unlikely it will take any meaningful action, said Bruce Everett, a former Exxon Mobil Corp. executive who teaches at Tufts University and analyzes global oil markets. "Supply and demand are dictating prices, and nobody right now is in a position to change that," Everett said.

While that might cause pain for the Houston economy, more broadly, it's what American consumers want. "From a consumer standpoint, this is what you'd like to happen," Everett added. "You don't want big countries like Saudi Arabia controlling the price of oil for the American consumer."

There were new indications Wednesday the decline in crude oil prices may be rippling through the local economy.

In Houston, a survey of area purchasing managers released Wednesday suggested the economy is not growing as fast as it was earlier in the year and experts said the volume local home sales could drop next year as fewer people move here.

Local economy to be tested

The Houston Purchasing Managers Index measured 54.3 points in November, down from 58.5 points in October. On a 100-point scale, readings higher than 50 indicate an expanding economy while readings below 50 point toward coming contraction. The study is based on the input of about 45 local companies including those in energy, manufacturing and health care.

"We're seeing big concern about where oil prices are going to be, both short and long term," said Ross Harvison, chairman of the Institute for Supply Management-Houston Business Survey Committee.

Houston's economy has diversified significantly since oil prices last triggered a major crisis in the city, but oil and gas remain the dominant business, said Bill Arnold, a professor at the Rice University's Jones Graduate School of Business who previously worked at Shell.

"We're all enjoying these low gasoline prices, but I think that the greater concern is the hub of our economy," he said. "The dramatic decline of oil prices will test our resilience and it will test our diversification."

But Weinstein, of SMU, said even though the energy sector is a major part of the Texas company, it has a lot of energy-consuming industries as well, like petrochemicals, power generation and metal fabrication - all of which benefit from inexpensive crude. "It could be net positive for the country," Weinstein said. "It could even be a net plus for Texas."

Reporters Collin Eaton, Robert Grattan, Rhiannon Meyers and L.M. Sixel contributed.