May 8, 2020 - Energy & Environment

Coronavirus drives oil to a "rapid and brutal adjustment"

Ben Geman, author of Generate

Photo: Jonathan Raa/NurPhoto via Getty Images

The consultancy IHS Markit now expects roughly 14 million barrels per day of crude oil production worldwide to be "cut or shut-in" during the second quarter.

The big picture: IHS analyst Jim Burkhard, in a statement, said a "rapid and brutal adjustment of global oil supply to a lower level of demand is underway."

  • He said all producing nations are subject to the "same brutal market forces," but some will be more affected than others.
  • IHS calls the cuts the largest in industry history.

Why it matters: The fresh estimate is the latest eye-popping tally of how the collapse in demand is affecting oil markets.

  • A suite of U.S. companies are announcing major cutbacks. The latest came yesterday afternoon.
  • The independent producer EOG Resources said shut-in of existing wells will cut production this month by 125,000 barrels per day.

Go deeper: Big oil group API opposes special handouts in coronavirus crisis

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Flashback: In December, similar divergence popped up in the two indexes' manufacturing reports, but with ISM's data showing much weaker numbers — the worst manufacturing report in a decade.

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Can we trust this morning's surprisingly good employment report?

  • The short answer: Yes.

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