HOUSTON
— Oil prices tumbled more than 7 percent on Tuesday, falling to their
lowest levels in more than a year, after investors learned that Russia
and the United States were pumping a lot more oil than had been
expected.
The American benchmark fell
below $47 a barrel for the first time in 15 months, capping a slide
that has brought prices down by more than a third since early October.
Bountiful,
cheap oil supplies are an unanticipated holiday bonus for American
consumers. The average price of regular gasoline has fallen to $2.37 a
gallon, according to the AAA motor club, 26 cents lower than a month
ago. For most of the year gasoline prices were rising, but the recent
decline in oil prices has driven gasoline down by about a nickel a
gallon compared with a year ago.
Oil
prices had stabilized earlier this month when the Organization of the
Petroleum Exporting Countries and Russia agreed to slash production by
1.2 million barrels a day. But Russia announced on Monday that its
output had increased to more than 11.4 million barrels a day, a record,
putting in doubt its commitment to coordinate policies with Saudi Arabia
and other oil producers.
On
the same day, the Energy Department reported that the United States was
producing 11.6 million barrels of crude oil a day, nearly a million
barrels more than a year ago. The department projects that shale-oil
production will climb to record levels this month, and increase by
134,000 barrels a day in January.
A
shortage of pipelines has driven down oil prices from the Permian Basin
of West Texas and New Mexico, the most productive American oil field.
But the completion of a series of pipelines in late 2019 should benefit
producers and increase exports, adding even more barrels to the global
glut.
The
oil industry has struggled since prices plummeted to below $30 a barrel
in 2016. Hundreds of small producers and oil-services companies sought
bankruptcy protection, and more than 160,000 jobs were cut. As prices
increased in 2017 and earlier this year, the industry regained some of
that lost ground — a recovery now under threat.
“It
sure will hurt if it lasts very long,” said Tom Dunlap, president of
Tripledee Drilling of Ardmore, Okla. Mr. Dunlap said a price of $60 to
$70 a barrel was typically needed to drill a new well profitably in his
state.
Oil companies have become more
efficient by relying on robotics and other technologies to replace
workers, enabling them to explore and produce at lower prices. Those
adjustments could come in handy as businesses are forced to cut back
again in the coming months.
“These
organizations have had to figure out they need to make a profit at $50
to $60 oil,” said Thomas M. Siebel, chief executive of C3, an
artificial-intelligence software company that works with Royal Dutch
Shell. “To do that they need to lower the cost of production, lower
their exploration costs, lower their drilling costs; costs of operation
have to be more efficient.”
So far,
there are few signs that companies will meaningfully reduce exploration
in 2019, though that could change if prices keep falling and the economy
slows.
A version of this article appears in print on , on Page B2 of the New York edition with the headline: Oil Prices Plummet 7% As Investors Fear a Glut.
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