Oil sector cutting spending as Wall Street turns its back

Rising production. Weakening demand. Skeptical investors. The U.S. energy sector, while not entering a downturn, is facing an extended period of lower oil prices, lower profits and tighter spending, ultimately leading to slower growth, fewer companies and fewer jobs in Houston and across the oil and gas industry. In less than a year, the fundamentals of energy markets have shifted dramatically, from forecasts of looming shortages to worries about mounting supplies. Even with OPEC’s agreement this week to extend production cuts into next year, oil markets remain worried about deteriorating global energy demand and record U.S. production. Crude has struggled to break out of the $50-to-$60-a-barrel range, despite heightened tensions in the Middle East and the output reductions by the Organization of the Petroleum Exporting Countries. Some companies can still make money at those levels, but not enough to fuel significant expansions or satisfy increasingly impatient investors. Wall Street already has turned its back on the sector, unhappy with its lackluster returns but also increasingly focused on challenges to the industry— and earnings — from climate change, renewable energy and electric vehicles. The S&P Energy index is down more than 16 percent in the past 12 months even as the broaders S&P 500 index has gained 9 percent...MORE