The oil industry of America is facing an end of time scenario. The COVID-19 outbreak caused oil demand to plunge so rapidly as the world is running out of storage to store excessive barrels. At the same time, Saudi Arabia and Russia flooded the oil world with surplus supply. That dual black swan caused the oil prices in the United States to collapse to levels that make it impossible for the shale oil companies in the U.S. to earn money.
U.S. oil prices have crashed below $0 a barrel. This is not a problem. We should not try to prop up oil prices. We should not bail out oil companies. We should accelerate our shift to solar, wind, and other non-fossil fuels.
— Robert Reich (@RBReich) April 20, 2020
On Monday, the American crude for the delivery in May turned negative – that never happened in the history since NYMEX oil futures started trading in 1983 – the worst day of the oil market’s recorded. American crude for the delivery of June is still trading over $20 per barrel – but even that is terrible. Head of shale research at Rystad Energy, Artem Abramov said that $30 already bad, but once one may get $20 or even $10. Several oil companies took on too much duty during the market good times. Among those, some companies will not be able to survive during this worldwide historic lockdown.
According to the forecasts of Rystad, an environment of $20, 533 United States oil production and exploration firms will file for bankruptcy by the 2021 end. It estimates, at $10, over 1110 files for bankruptcy. In addition, Abramov said that at $10, approximately every American E&P company with debt would have to file Chapter 11 or must to consider strategic opportunities.
Low-priced crude could force oil bankruptcies wave
The United States at $20 might cause over five hundred bankruptcies among production and exploration companies by the 2021 end.
Source: Rystad Energy
OPEC cuts failed to end the market panic
The most extraordinary part of the record low prices of oil is that it comes after Saudi Arabia and Russia settle on a deal to end their pro-long price war after the efforts of Donald Trump. OPEC+ decided to reduce oil production by a huge amount. Trump said the agreement of OPEC+ would save a large number of jobs as well as much needed constancy to the oil patch. Trump tweeted on 13th April that the deal will save many energy jobs. He also praises and congratulates King Salman of Saudi Arabia and President Putin of Russia.
The big Oil Deal with OPEC Plus is done. This will save hundreds of thousands of energy jobs in the United States. I would like to thank and congratulate President Putin of Russia and King Salman of Saudi Arabia. I just spoke to them from the Oval Office. Great deal for all!
— Donald J. Trump (@realDonaldTrump) April 12, 2020
American Oil goes negative for the first time in history
U.S. Oil prices plunge under $0 as demand falls and the country ran out of space to store barrels of crude oil.
Thus far, crude going on crashing, in part because those production cuts in oil do not kick in till May. Moreover, the demand for oil continues to vanish because of the pandemic lockdown as jets & cars are steady, and factories stop working. The record low in the next month contract comes on very little trading volume ahead of the expiration of Tuesday. That’s all happening because there is no storage space to store those barrels that will deliver in May.
However, the June contract only fell about ten percent to $22 per barrel. And the world benchmark, Brent crude plunge five percent to $26.50 per barrel. Still, oil agreements upturn every month, and they do not crash to record lows. Energy strategist at Rabobank, Ryan Fitzmaurice, said there would be a lot of oil firms that would not survive this downturn.
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