Business

Cautious optimism for US oil industry

NEW YORK The US oil industry is feeling guarded optimism going into this year as it pivots from a brutal two-year slump prompted by crashing crude prices.

Industry insiders describe a tentative recovery, with some low-cost drilling basins starting to pick up even while others remain depressed.

The downturn, among the worst since the 1973 Arab oil embargo, led to bankruptcies, layoffs of hundreds of thousands of workers and a significant pause on the American shale boom.

Energy producers have been cheered by the election of Mr Donald Trump, whose cabinet picks include oil industry allies like climate-change sceptic Scott Pruitt to head the Environmental Protection Agency and ExxonMobil chief executive Rex Tillerson as secretary of state.

GUARDED

"Operators are still being guarded with their money," said Mr Jason McFarland, president of the International Association of Drilling Contractors (IADC) in Houston.

"But certainly, we're seeing a loosening of the grip on investments as the price of oil rises."

Sentiment got a boost from the Nov 30 agreement by the Organisation of the Petroleum Exporting Countries (Opec) to cut production to address a glut that had threatened to push prices back to multi-year lows.

US oil prices, which tumbled to close to US$25 (S$36) a barrel a year ago, closed at US$53.99 a barrel on Friday.

Part of the industry's hesitancy is due to scepticism about whether Opec members and countries outside the cartel, such as Russia, will actually comply with the agreed production cuts.

And if the cuts are implemented, there remains the question of what will happen if the agreement is not renewed after its six-month duration.

How fast the industry can recover is uncertain. - AFP

united statesEnvironmentENERGY