Data: FactSet; Chart: Axios Visuals

Crude oil is languishing in the "friend zone," and that's not enough for substantial swaths of the ailing sector.

The state of play: U.S. prices have hung out in the roughly $40-per-barrel range (and sometimes lower) for the last month after sharply recovering from the depths of April's price and demand collapse.

Why it matters: "I don’t think that $40 oil is enough to turn around the shale industry," oil analyst Andy Lipow tells the Wall Street Journal.

  • "This price is still not enough to cover all the debt and costs that have been incurred during the boom," he said.

Threat level: There's other evidence that $40-per-barrel doesn't cut it for a number of oil-and-gas companies.

  • An April Kansas City Fed survey of companies in their region found that roughly one-third said they do not expect to remain solvent at $40, even if prices stay there for less than a year.
  • On the brighter side, a Dallas Fed survey in June of companies in their area, which includes Texas, found that the vast majority expect to remain solvent for the next year.
  • However, a number of U.S. companies have already declared bankruptcy during the current crisis.

Where it stands: This morning, Brent crude was trading around $42.92 and WTI at roughly $40.40.

  • The worsening spread of COVID-19 in the U.S. is creating headwinds even as output cuts domestically and worldwide have succeeded in tightening the market.
  • "Over the last few weeks, traders have put more weight on how supply evolves, but from now everyone’s eyes are on demand again and how COVID-19 expands in the U.S.," Rystad Energy analyst said in a note Tuesday.

Yes, but: While low prices jeopardize some companies, Bloomberg reports the shale industry is getting more than $2.4 billion in loans from the federal Paycheck Protection Program.

Go deeper

Amy Harder, author of Generate
Sep 17, 2020 - Energy & Environment

How sudden geopolitical events bring about long-term changes in oil use

Expand chart
Reproduced from Morgan Stanley; Chart: Axios Visuals

Sudden changes in world politics can bring about permanent changes in oil-and-gas use, per a recent Morgan Stanley report.

Driving the news: Geopolitical unrest in the late '70s and early '80s — the Iranian Revolution and start of the Iran-Iraq war — disrupted a lot of oil supply that, in turn, sent prices skyrocketing. That sudden jolt to the global oil system permanently cut oil consumption per capita that’s stayed with the world ever since, says Martijn Rats, managing director for equity research for Morgan Stanley.

Fed upgrades expectations for pandemic-hit economy

Jerome Powell testifies before Congress in June. (Photo: Tasos Katopodis/Pool/ AFP via Getty Images)

The Federal Reserve said Wednesday that the economy will shrink by 3.7% this year — a rosier outlook than the 6.5% contraction initially projected in June.

Why it matters: The economy is still wrecked by the coronavirus pandemic, but has rebounded faster than some anticipated. Signs still suggest the recovery could stall out. The August unemployment rate is already lower than where the Fed, in June, said it would be by year-end.

Dion Rabouin, author of Markets
27 mins ago - Politics & Policy

Wall Street fears stimulus is doomed

Illustration: Sarah Grillo/Axios

The fight over a new Supreme Court justice will take Washington's partisan bickering to a new level and undermine any chance for needed coronavirus relief measures before November's election, Wall Street analysts say.

What we're hearing: "With the passing of Justice Ginsburg, the level of rhetorical heat has increased, if that seemed even possible," Greg Staples, head of fixed income for the Americas at DWS Group, tells Axios in an email.

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