Mar 18, 2020 - Energy & Environment

Oil plunges and industry pain spreads

Photo: Carsten Rehder/picture alliance via Getty Images

This morning is bringing fresh and stark signs of how economic contraction from COVID-19 is crushing the oil market and forcing companies to cut back.

The big picture: The price collapse stems from COVID-19 freezing a significant amount of travel and economic activity, and the collapse of the Saudi-Russia agreement to limit production.

Threat level: "An OPEC+ supply surge and crumbling oil demand are leading to concerns about a surplus that could overwhelm global storage," BofA Global Research said in a note this morning (emphasis added).

Driving the news: The number of companies announcing spending and workforce cutbacks keeps growing.

  • This morning, the huge U.S. producer ConocoPhillips said it would cut $700 million from its planned capital spending this year and scale back its share buy-back program.
  • Oilfield services giant Halliburton is furloughing about 3,500 employees in Houston as oil producers slow operations, per Reuters.
  • "The sudden crash in global oil prices has prompted Australian oil and gas producer Oil Search to cancel sale talks and slash spending by up to $675 million by shelving projects around the world," the Sydney Morning Herald reports.
  • Argus Media's Ben Winkley, via Twitter, tallies several more announcements as they come "thick and fast."

What's next: Analysts are racing to update their estimates of how much global oil demand is cratering. Rystad Energy this morning sharply revised their projections from a week ago.

  • They now see year-over-year demand dropping 2.8 million barrels per day, which would be a 2.8% decline. A week ago they were projecting only a 600,000 barrel per day full-year drop.
  • "At the moment we expect the month of April to take the biggest hit, with demand for oil falling by as much as 11 million bpd year on year," the consultancy notes.

Go deeper

The fallout from oil's collapse

Data: Yahoo Finance; Chart: Axios Visuals

ExxonMobil, citing an "unprecedented environment," said last night that it plans to "significantly" cut spending in light of the coronavirus and the collapse in oil prices.

Why it matters: The oil giant's announcement is the latest sign of how deeply the upended market is affecting the sector.

Coronavirus could drive down global oil consumption in 2020

Illustration: Aïda Amer/Axios

A number of forecasts show global oil consumption dropping this year for the first time since the financial crisis over a decade ago as the coronavirus outbreak prevents travel and stymies other economic activity.

What they're saying: The firm Rystad Energy, in a note yesterday, says it now projects global oil demand to fall by 600,000 barrels per day year-over-year — the world uses roughly 99 million barrels of oil per day — compared to 2019 levels.

Trump vows to press Putin after Russia-Saudi Arabia oil fallout

Trump and Putin at the G20 in Osaka in 2019. Photo: Mikhail Svetlov/Getty Images

President Trump said on "Fox & Friends" Monday morning that he's planned to speak with Russian President Vladimir Putin about the Russia-Saudi rupture on oil policy that's helping to push prices lower.

What he's saying: "I’m talking to him about that among other things, because you know, getting along with Russia is a good thing," Trump said in a response to a question about pain in the oil-and-gas industry.