The number of active oil, gas and other drilling rigs in the USA since the beginning of 2020 has more than halved and reached 339. This is evidenced by the latest data from Baker Hughes.
As follows from the materials of the American Energy Information Administration (EIA), drilling activity in the United States has weakened to a minimum for the entire time of official observations - since the 1940s.
Amid a sharp decline in oil prices in recent months, the extraction of raw materials has become unprofitable for most shale companies. As a result, enterprises are forced to massively suspend work. This was in an interview with RT, said the analyst of Finam Group Alexei Kalachev.
“The price of oil has fallen sharply due to weakening global demand for fuel, so the profitability of many projects, especially shale ones, has declined. In a natural market way, production is reduced and wells are frozen. The fact is that the cost of producing shale oil is about $ 35, while, for example, Russian - about $ 12. Therefore, maintaining prices below the level of $ 35 per barrel is accompanied by the closure of towers in the United States, ”the expert explained.
Global demand for fuel and energy has declined significantly as a result of the coronavirus pandemic and quarantine restrictions in most countries. The situation has led to the fact that since the beginning of the year, a barrel of oil of the American grade WTI has fallen in price by almost half and is currently trading near the $ 29 mark.
In April, for the first time in history, the price of an exchange contract for the supply of WTI oil fell to negative values. This was partly due to the fact that the reservoirs of the world oil storage facilities were almost full and the contract holders themselves were willing to pay for the refusal to accept raw materials.
“The fact is that the extracted oil is simply nowhere to go. Now the largest US oil storage Cushing is approximately 81% full. Therefore, tankers drifting into the sea now also have to be used as storage facilities, ”Kalachev explained.
Although it is no longer profitable for American producers to produce new oil, the long downtime of enterprises risks provoking a wave of bankruptcies in the industry. This point of view in an interview with RT was voiced by EXANTE managing partner Alexei Kiriyenko.
“US shale companies at one time relied on production growth. Due to the low interest rates on loans, they received financing from banks. However, oil prices did not rise so high that the industry received excess profits. As a result, the debt burden remained high, and now many companies can no longer pay for loans, ”Kiriyenko said.
According to the April report of Haynes & Boone, from the beginning of 2015 to the first quarter of 2020, 215 energy companies went bankrupt in North America. Their total debt amounted to $ 129.4 billion. Of this amount, $ 70.35 billion accounted for unsecured loans. As expected, by the end of 2020, the number of bankrupt producers of raw materials will only increase.
“At the moment it is not clear what the price level will be in the coming quarters, but the trend is obvious. Oil companies and their lenders should get used to the idea that low rates (of the oil market. - RT ) will last a long time, ”say Haynes & Boone.
- Reuters
- © David Mdzinarishvili
According to RT analysts surveyed, the worsening situation in the US shale sector could have a positive effect on the global energy market in the long run. Thus, the withdrawal of a part of oil producing companies from the industry will make it possible to some extent reduce the supply of energy in the world and thereby support oil prices.
Meanwhile, the implementation of the OPEC + transaction and the situation with coronavirus in the world will have a major impact on the cost of hydrocarbons in the near future. According to Alexei Kalachev, depending on the speed of lifting quarantine restrictions in a number of countries, oil prices may rise to $ 40 per barrel by the end of 2020 or by the middle of 2021.
At the same time, the expected recovery in oil prices will not be enough to improve the financial situation of American shales. This view is shared by Anton Pokatovich, chief analyst of BCS Premier.
“Given the current financial problems in the US oil industry, companies need oil prices near $ 45-60 per barrel of WTI grade to restore crude production and return to“ normal ”activities. However, the expected price recovery will require quite a long time, and by the end of 2020, quotes will be able to recover only to $ 40. Against this background, the US oil industry will continue to remain under pressure, ”Pokatovich explained in a conversation with RT.