Oil industry spending will fall until at least 2020, agency says

Oil companies are funneling less money into new drilling, a government agency reported Thursday, reinforcing an outlook that several companies already have demonstrated through budget cuts this year and projections for 2016.

The U.S. Energy Information Administration said in a report Thursday that annual investment among producers averaged a combined $122 billion from 2005 to 2014 - a 10-year stretch during which the price of domestic benchmark crude was volatile, but averaged $81.73 per barrel.

That price now is only a memory. The Energy Department Agency forecasts U.S. oil going for only $70 per barrel in 2020 even after a recovery, and projects far less annual capital investment than companies recorded in the last 10 years. The agency did not forecast a specific spending level.

Oil producers and services companies are cutting payrolls too. Houston energy consultant John Graves, president of firm Graves & Co., estimates the energy industry has eliminated 196,000 jobs worldwide.

Two major companies added to that toll Thursday, as construction and mining equipment maker Caterpillar and pipeline giant TransCanada cited energy industry doldrums in announcing job cuts.

Caterpillar said it will cut 10,000 salaried and management jobs in several phases as part of a wider push to eliminate $1.5 billion in annual costs.

The Peoria, Ill.-based company, which has a sizable business supplying machinery for oil and gas producers, employs about 130,000 worldwide. The company runs a manufacturing plant in Victoria, 125 miles southwest of Houston, and employs about 4,300 across the state.

Caterpillar said it plans to cut 4,000 to 5,000 workers in the first round of reductions this year and next. The company expects to reach its target of 10,000 layoffs by 2018.

A spokeswoman said that most of this year's cuts will be in the U.S., but she declined to elaborate.

TransCanada, based in Calgary, Alberta, said it plans to cut about 20 percent of its senior leadership positions as part of a corporate restructuring. Those cuts follow a previous round of about 185 layoffs in June.

About 580 of Trans-Canada's 6,000 total workers are in Houston.

"Falling oil prices and the current environment are having a profound impact on our customers and we must do all we can to drive down costs and pursue our projects more efficiently and strategically," spokesman James Millar said in a written statement.

U.S. benchmark West Texas Intermediate crude oil rose modestly on Thursday, gaining 43 cents to $44.91 per barrel. London-traded Brent crude, the international benchmark, gained 42 cents to $48.17.

So far this year, West Texas Intermediate has averaged $51.15 per barrel, slumping from an average $92.91 in 2014.

Producers' revenue has fallen along with the price of the oil they sell, and many are cutting capital expenditures on drilling projects in response.

The Energy Information Administration estimates that from 2003 to 2014, upstream spending increased from $56 billion to a high of $158 billion as crude oil averaged about $90 a barrel and set a record price of $145.29 in July 2008.