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| Oil Companies on Tumbling Prices: ‘Disastrous, Devastating’ | Oil Companies on Tumbling Prices: ‘Disastrous, Devastating’ |
| (7 days later) | |
| HOUSTON — The once mighty oil industry is shrinking quickly around the world, hunkering down in survival mode. | HOUSTON — The once mighty oil industry is shrinking quickly around the world, hunkering down in survival mode. |
| With the coronavirus pandemic all but eliminating travel and commutes, demand for energy is tumbling, and oil companies from Algeria to West Texas are slashing budgets. Refineries are cutting production of gasoline, diesel and jet fuel. Pipeline operators are telling producers that they can ship crude only if there is a buyer willing to take the fuel because storage tanks are filling up fast. And American oil companies are dropping rigs, dismissing fracking crews and beginning to shut down wells. | With the coronavirus pandemic all but eliminating travel and commutes, demand for energy is tumbling, and oil companies from Algeria to West Texas are slashing budgets. Refineries are cutting production of gasoline, diesel and jet fuel. Pipeline operators are telling producers that they can ship crude only if there is a buyer willing to take the fuel because storage tanks are filling up fast. And American oil companies are dropping rigs, dismissing fracking crews and beginning to shut down wells. |
| As much as 20 percent, or 20 million barrels a day, of oil demand may be lost as the global economy slows, according to the International Energy Agency. That is roughly equivalent to eliminating all U.S. consumption. To make matters worse, Saudi Arabia and Russia are increasing oil production to regain market share from American oil companies that increased production and exports in recent years. | As much as 20 percent, or 20 million barrels a day, of oil demand may be lost as the global economy slows, according to the International Energy Agency. That is roughly equivalent to eliminating all U.S. consumption. To make matters worse, Saudi Arabia and Russia are increasing oil production to regain market share from American oil companies that increased production and exports in recent years. |
| The Trump administration has been trying to convince Saudi Arabia and Russia that they should cut production to help stabilize the oil market; President Trump and President Vladimir V. Putin of Russia discussed energy markets in a call on Monday. But the energy demand destroyed by the virus now overshadows anything that Saudi Arabia or Russia could do to reduce exports. | The Trump administration has been trying to convince Saudi Arabia and Russia that they should cut production to help stabilize the oil market; President Trump and President Vladimir V. Putin of Russia discussed energy markets in a call on Monday. But the energy demand destroyed by the virus now overshadows anything that Saudi Arabia or Russia could do to reduce exports. |
| Global oil benchmark prices hover around $20 a barrel — levels not seen in a generation — and regional prices in West Texas and North Dakota have fallen even further, to around $10 a barrel. That is about a quarter of the price that shale operators typically need to cover the costs of pulling oil out of the ground. If these prices persist, a big wave of bankruptcies is inevitable by the end of the year, experts say. | Global oil benchmark prices hover around $20 a barrel — levels not seen in a generation — and regional prices in West Texas and North Dakota have fallen even further, to around $10 a barrel. That is about a quarter of the price that shale operators typically need to cover the costs of pulling oil out of the ground. If these prices persist, a big wave of bankruptcies is inevitable by the end of the year, experts say. |
| “The picture looks bleak,” said Trent Latshaw, president of Latshaw Drilling, an oil service company active in Texas and Oklahoma with only 10 of its 41 rigs currently deployed. “We have never had this situation where you have a huge increase in supply and a huge decrease in demand at the same time. Oil prices are down to $20 a barrel, and we don’t know where the bottom is.” | “The picture looks bleak,” said Trent Latshaw, president of Latshaw Drilling, an oil service company active in Texas and Oklahoma with only 10 of its 41 rigs currently deployed. “We have never had this situation where you have a huge increase in supply and a huge decrease in demand at the same time. Oil prices are down to $20 a barrel, and we don’t know where the bottom is.” |
| All told, global investments in exploration and production are expected to fall in 2020 by $100 billion, or 17 percent below last year, according to Rystad Energy, a research and consulting firm based in Oslo. That drop is only the latest jolt to an industry that has been tightening budgets for years. The $446 billion that the industry is expected to invest is just over half the $880 billion it spent on exploration and production in 2014. | All told, global investments in exploration and production are expected to fall in 2020 by $100 billion, or 17 percent below last year, according to Rystad Energy, a research and consulting firm based in Oslo. That drop is only the latest jolt to an industry that has been tightening budgets for years. The $446 billion that the industry is expected to invest is just over half the $880 billion it spent on exploration and production in 2014. |
| The share prices of large companies like Exxon Mobil, ConocoPhillips and Chevron have nearly halved in recent months, while the stocks of smaller firms with less healthy balance sheets have fallen even more. | The share prices of large companies like Exxon Mobil, ConocoPhillips and Chevron have nearly halved in recent months, while the stocks of smaller firms with less healthy balance sheets have fallen even more. |
| In ordinary times, a big drop in energy prices would be a boon to consumers, who would have more money left over after filling up their cars and trucks. But many people have nowhere to drive to, and gas stations report that sales have plummeted, even as the national average price of gasoline has tumbled to less than $2 a gallon, according to AAA. Refiners are shutting down several gasoline distillation units on the Gulf of Mexico because demand is so weak. | In ordinary times, a big drop in energy prices would be a boon to consumers, who would have more money left over after filling up their cars and trucks. But many people have nowhere to drive to, and gas stations report that sales have plummeted, even as the national average price of gasoline has tumbled to less than $2 a gallon, according to AAA. Refiners are shutting down several gasoline distillation units on the Gulf of Mexico because demand is so weak. |
| The crisis may only be just beginning. The U.S. rig count last week was 728, down 44 from the week before, according to Baker Hughes. In Texas, the biggest oil-producing state, 368 rigs were operating on Friday, compared with 491 a year ago. Mr. Latshaw said those numbers could go down by another 300 or more by the time the oil price hits bottom. | The crisis may only be just beginning. The U.S. rig count last week was 728, down 44 from the week before, according to Baker Hughes. In Texas, the biggest oil-producing state, 368 rigs were operating on Friday, compared with 491 a year ago. Mr. Latshaw said those numbers could go down by another 300 or more by the time the oil price hits bottom. |
| In a sign that the industry expects lasting distress, Phillips 66 has put on hold two pipeline projects connecting West Texas oil fields with Gulf Coast refineries and export terminals. | In a sign that the industry expects lasting distress, Phillips 66 has put on hold two pipeline projects connecting West Texas oil fields with Gulf Coast refineries and export terminals. |
| Occidental, Chevron, Pioneer Natural Resources, Parsley and other oil companies are sharply cutting operations in the Permian Basin of Texas and New Mexico, the epicenter of the U.S. shale-oil production boom. Schlumberger and other large service companies are cutting and furloughing thousands of workers. | Occidental, Chevron, Pioneer Natural Resources, Parsley and other oil companies are sharply cutting operations in the Permian Basin of Texas and New Mexico, the epicenter of the U.S. shale-oil production boom. Schlumberger and other large service companies are cutting and furloughing thousands of workers. |
| The situation is no better elsewhere in the world. With more oil than they can possibly sell, major producing countries like Nigeria, Brazil, Ecuador, Angola and Canada have only a few weeks of storage available before pipeline systems back up and production has to be curtailed. | The situation is no better elsewhere in the world. With more oil than they can possibly sell, major producing countries like Nigeria, Brazil, Ecuador, Angola and Canada have only a few weeks of storage available before pipeline systems back up and production has to be curtailed. |
| The Algerian state oil company, Sonatrach, is planning to halve its spending to $7 billion. Brazil’s Petrobras is slashing its spending by more than 25 percent, and its offshore partners Royal Dutch Shell, Exxon Mobil and Equinor of Norway are cutting as well. Large global oil companies, like Shell, Total of France and Eni of Italy, are averaging spending cuts of 20 percent in their global operations. | The Algerian state oil company, Sonatrach, is planning to halve its spending to $7 billion. Brazil’s Petrobras is slashing its spending by more than 25 percent, and its offshore partners Royal Dutch Shell, Exxon Mobil and Equinor of Norway are cutting as well. Large global oil companies, like Shell, Total of France and Eni of Italy, are averaging spending cuts of 20 percent in their global operations. |
| Even Saudi Arabia and Russia — which helped to spark the oil price collapse with their recent moves to increase, rather than cut, production — are vulnerable to the demand shock produced by the pandemic. There may be fewer buyers for the extra oil those countries are producing. | Even Saudi Arabia and Russia — which helped to spark the oil price collapse with their recent moves to increase, rather than cut, production — are vulnerable to the demand shock produced by the pandemic. There may be fewer buyers for the extra oil those countries are producing. |
| “They can undercut U.S. pricing, but refiners likely don’t want any more crude,” said Paul Sankey, managing director at Mizuho Securities. “If there is no market, there is no market.” | “They can undercut U.S. pricing, but refiners likely don’t want any more crude,” said Paul Sankey, managing director at Mizuho Securities. “If there is no market, there is no market.” |
| Updated June 22, 2020 | |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. | States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. | If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. |
| The fallout will be severe for oil-producing developing countries that finance social programs with oil revenues. Mexican Maya crude is already selling on American markets for under $10 a barrel for the first time in over two decades, undercutting Colombian and Ecuadorean producers struggling to break even. | |
| And despite the cuts in American exploration, production will fall only gradually from its current 13 million barrels a day, perhaps by a couple of million barrels a day in the coming months. | And despite the cuts in American exploration, production will fall only gradually from its current 13 million barrels a day, perhaps by a couple of million barrels a day in the coming months. |
| Energy experts say profit margins for a small, though increasing, number of older wells have morphed into losses, so that companies cannot even cover fixed costs. Under those circumstances, it makes no sense to produce oil, and those wells will have to be turned off completely — a process that is expensive to reverse and sometimes damages wells. | Energy experts say profit margins for a small, though increasing, number of older wells have morphed into losses, so that companies cannot even cover fixed costs. Under those circumstances, it makes no sense to produce oil, and those wells will have to be turned off completely — a process that is expensive to reverse and sometimes damages wells. |
| “There is no precedent for the scale of potential shut-ins,” said Fraser McKay, a vice president at Wood Mackenzie, an energy research and consulting firm. “The industry’s ability to keep higher-cost barrels flowing will be severely tested.” | “There is no precedent for the scale of potential shut-ins,” said Fraser McKay, a vice president at Wood Mackenzie, an energy research and consulting firm. “The industry’s ability to keep higher-cost barrels flowing will be severely tested.” |
| At particular risk are the hundreds of small private American oil companies that have as few as a handful of wells, or as many as a couple of hundred. They were highly profitable when oil prices were $100 a barrel or more. These companies are the backbone of rural communities in states like Oklahoma, Texas, Louisiana and Montana. But now they could be a big liability for local economies because they may not be able to repay loans to regional banks. | At particular risk are the hundreds of small private American oil companies that have as few as a handful of wells, or as many as a couple of hundred. They were highly profitable when oil prices were $100 a barrel or more. These companies are the backbone of rural communities in states like Oklahoma, Texas, Louisiana and Montana. But now they could be a big liability for local economies because they may not be able to repay loans to regional banks. |
| “It’s disastrous, devastating,” said Darlene Wallace, president of Columbus Oil, a small Oklahoma company. “I hate to sound like a little old lady, but it’s frightening.” | “It’s disastrous, devastating,” said Darlene Wallace, president of Columbus Oil, a small Oklahoma company. “I hate to sound like a little old lady, but it’s frightening.” |
| Ms. Wallace said she shut down two wells late last year as oil prices began to slide and would shut eight of her remaining 19 wells on Tuesday. She said many other producers were in worse shape because they had borrowed money in recent years to buy wells for what they considered low prices. She has been paying off debts and cutting payroll and other costs since oil prices fell in 2014. | Ms. Wallace said she shut down two wells late last year as oil prices began to slide and would shut eight of her remaining 19 wells on Tuesday. She said many other producers were in worse shape because they had borrowed money in recent years to buy wells for what they considered low prices. She has been paying off debts and cutting payroll and other costs since oil prices fell in 2014. |
| There may be no solution for those operations, along with dozens of larger private and public companies, said Raoul LeBlanc, a vice president at IHS Markit. | There may be no solution for those operations, along with dozens of larger private and public companies, said Raoul LeBlanc, a vice president at IHS Markit. |
| “We’re going to have a whole lot of consolidation with a lot of small players going broke or joining together to try to stave off their debt situations, reduce their expenses and survive this,” Mr. LeBlanc said. “There’s literally no room to put the oil.” | “We’re going to have a whole lot of consolidation with a lot of small players going broke or joining together to try to stave off their debt situations, reduce their expenses and survive this,” Mr. LeBlanc said. “There’s literally no room to put the oil.” |