The Dallas Federal Reserve, which has the Permian basin in its economic region, expects the oil and gas sector to cut capital spending by 10% to 15% in 2020.

Rob Kaplan, president of the Fed district, said in an essay that the decline in oil production growth will have a substantial impact on the energy service companies. Some have already announced restructurings and layoffs, but he expects to see more of that, and 2020 will be a year of consolidation and cost cutting as well.

U.S. oil production is expected to grow by 700,000 barrels a day from fourth quarter 2019 to fourth quarter 2020. The forecast assumes a decline of 700,000 barrels a day in non-OPEC production and a drop of the same level by OPEC.

Kaplan also cited International Energy Agency forecasts that global oil demand will grow by 1 million barrels per day in 2020 to 102.2 million bpd. He points out that the coronavirus could chill demand, presenting a meaningful risk to demand growth since China accounts for about 14% of total global consumption and about 57% of consumption growth in 2019.

The IEA forecasts the virus impact could reduce demand by about 400,000 in the first quarter, the first decline since the Great Recession, Kaplan noted. The decline should reverse in following quarters in 2020, he said.

"In the U.S. more broadly, lower oil prices should benefit U.S. consumers by freeing up more of their disposable income for the consumption of non-oil goods and services," he wrote. But he added that since the U.S. is no longer a net importer of oil and refined products, the benefit of lower prices to U.S. GDP may be increasingly offset by the hit to energy producers.

"Changes in oil prices will increasingly redistribute income between sectors and states within the U.S., as opposed to impacting the transfer of income between the U.S. and other oil-exporting nations," he wrote.