Pretty soon the oil majors will be looking for a new round of corporate socialism.
Last fall, in what for him were better times, Ted Cruz was going about his business:
“We’re all wildly excited to have Senator Cruz join us for at OilComm,” says Michael Conti, Show Director of OilComm 2019. “His discussion around the current state of the oil and gas industry and his vision of where we are headed will make for a compelling discussion for OilComm’s attendees.”
(www.accessintel.com/...)
Yes, there might be some contradictions in his agenda: “Senator Cruz represents 28 million Texans in the U.S. Senate as a passionate fighter for limited government and economic growth.“ But suddenly Trump’s determination to gaslight science is running up against more than just global climate change and a real world pandemic: Now his financial proxies for Main Street are on 🔥, and not in a good way. We know about Ted Cruz being self-quarantined and stocks plunging, but look at what is happening to oil:
Crude Oil Price War
Crude oil futures were in meltdown, plunging 25% overnight. U.S. crude futures was trading around $31 a barrel after hitting $29.50 at one point.
Saudi Arabia on Saturday slashed its crude prices as it plans to boost production well above 10 million barrels per day and possibly much higher. Crude oil futures already tumbled 10% on Friday to multiyear lows. On Friday, OPEC and Russia not only failed to enact emergency coronavirus production cuts, but will end all output curbs starting in April.
(www.investors.com/...)
Already weeks ago the remaining big frackers were seeking a miraculous reprieve:
For fracking, “the drop between $65 and $50 is the difference between being profitable and being unprofitable,” Ebanks said. “We’re seeing large write-offs by Shell, Exxon, and others, recognizing that the value of their reserves wasn’t what people thought they were.”
There’s an additional complication. Smaller companies, many of which had borrowed too much and were over leveraged, are getting hit even harder. “Access to capital has been shut off,” Ebanks said. “Banks aren’t lending, and there are no [monetary] infusions to be had.”
If the fracking market had been in good shape before, this might be only a painful interlude. Unfortunately, conditions were already deteriorating.
(fortune.com/...)
By this weekend, we are seeing a full blown oil and gas pandemic panic:
An energy executive, who didn't wish to be named, told me by phone Sunday that in his view, every industry CEO needs to come out tomorrow and say that they are shutting down all new drilling activity, cutting CapEx, slicing dividends and aggressively trying to reduce output.
It sounds extreme, but his point was that unless U.S. production comes down by a few million barrels per day, fast, oil could easily fall into the $20s, which would crush the value of in-ground reserves that serve as the basis for so much debt collateral in the industry. Banks will realize it no longer makes sense to operate a business with hugely negative cash flow.
More simply put, if we fall to $25-$30 per barrel for an extended period of time, many traders and executives I've spoken with in the past 24 hours believe that stockholder pain will only get worse, and bankruptcy lawyers will be busy.
(www.cnbc.com/...)
The ground is falling out for the oil and gas industry in our country as a lagging indicator of a literally sick world. The future is more and more highly uncertain not only for regular working people everywhere but specifically for Trump’s oil and gas belt base.
Where’s this all headed? Sounds like massive layoffs are threatened. To stave this off, the same Republican politicians who criticized saving GM will probably have a change of heart.