With the covid-19 pandemic sweeping the globe, countries blocking their borders and imposing travel restrictions, crude oil prices have suffered their biggest quarterly drop ever in just the past month, hit by falling consumer and travel demand and a major oil price war between Saudi Arabia and Russia.
Oil prices are close to their lowest levels since 2002, as the COVID 19 outbreak has led to a global economic slowdown, undermining oil demand. Crude oil futures posted their biggest monthly drop in March, after plunging nearly 70 percent in the first quarter.
The collapse in oil prices poses a serious threat to the us shale oil industry. The us has grown into the world’s largest oil and gas producer in recent years thanks to a technology-driven shale drilling boom. But current oil prices are below the cost of production for many U.S. drillers. This has threatened the highly leveraged us shale oil industry.
On Monday, Mr. Trump said it was “crazy” for Russia and Saudi Arabia to engage in a price war after talks broke down, adding, “I never thought I would say, maybe we have to raise the price of oil because we really need to. “
Whiting Petroleum, the us shale oil company, announced on Wednesday that it had filed for bankruptcy, prompting its shares to be suspended from trading on the New York stock exchange, becoming the first major us shale oil producer to fall since the outbreak of the international oil price war.
In a statement, Whiting Petroleum said it had to restructure its finances because of the “severe downturn” in crude and natural gas prices caused by the saudi-russian oil price war and the impact of the COVID 19 outbreak.
Whiting Petroleum also said it had reached an agreement with some of its creditors to reduce the company’s debt by about $2.2 billion in exchange for a stake in the restructured company, while existing shareholders would receive 3 percent new shares.
The company, which is the first to file for bankruptcy protection as a result of the oil price war, also said it would continue to operate, that its suppliers, partners and employees would not be affected by the restructuring and that it expected to produce about 42 million barrels of crude oil by 2020.
Whiting Petroleum’s share price has plunged 91 per cent in the past three months as international oil prices have collapsed, sending its market capitalisation from $15bn in 2001 to $6.15m today. Shares of Whiting Petroleum fell another 44 percent to 37 cents in early trading Wednesday.
Whiting Petroleum, based in Denver, is one of the leading shale producers in the bakken region of North Dakota and the largest oil producer in Colorado.
Rystad Energy, a Norwegian Energy consultancy, has warned that $30 oil prices have virtually wiped out us shale producers, with the vast majority of more than 100 unprofitable.
U.S. crude inventories rose 13.8 million barrels to 469.2 million barrels in the week ended March 27, the energy information administration said on Wednesday. That was the biggest weekly gain since 2016. Analysts expect inventories to continue to rise as refiners cut back on refining capacity and gasoline demand declines.
The EIA said a number of state governments have issued home orders to try to prevent the spread of the virus, many residents have cut back on driving and gasoline demand has seen the biggest weekly drop on record.
Research firm Rystad Energy expects global oil demand to fall nearly 23 percent in April from a year earlier to 77.6 million barrels a day.