The new type of coronavirus (Covid-19) epidemic, which emerged in China and spread rapidly around the world, caused billions of dollars in losses in the US energy sector and sharp declines in oil production.
The fact that motor vehicles and air transportation came to a halt reduced the demand for gasoline, diesel and jet fuel in the United States, the world’s largest oil consumer.
On the supply side, the failure of US oil producers to quickly adapt to low prices and make timely cuts led to the filling of crude oil stock capacity in the country.
The barrel price of US West Texas Intermediate (WTI) oil fell on April 20, as US producers had difficulty finding a place to stock their crude oil and therefore wanted to dispose of the oil quickly, and contract holders avoided physical oil delivery before the futures contracts for May expired. It dropped to minus 37.63.
The outlook of the country’s oil industry and the number of oil drilling rigs, which is considered an indicator of short-term crude oil production, decreased for 7 consecutive weeks and fell to the lowest level since June 2016 between April 25 and May 1, indicating that the crude oil production of the USA will increase in the coming months. It also indicates that it will fall.
According to the data compiled by the AA correspondent, there is a crude oil stock capacity of 76 million barrels in Cushing city of Oklahoma, where the price of WTI type oil is determined and known as the heart of oil pipelines in the USA. However, it is known that as of the week of April 18-24, this capacity reached an occupancy rate of 83.4 percent with 63.4 million barrels.
Oil production fell by 1 million barrels
The production of the USA, which left Saudi Arabia and Russia behind in November 2018, becoming the world’s largest crude oil producer, broke a record by reaching an average of 13.1 million barrels per day in the week of February 22-28.
However, due to the decline in oil prices to their lowest level since 1999 last month due to the epidemic and the negatively affected financial situation of US companies, the country’s crude oil production decreased to an average of 11.9 million barrels per day in the week of April 25-May 1, decreasing to 1 barrel per day in the last 2 months. It decreased by .2 million barrels.
The outlook of the country’s oil industry and the number of oil drilling rigs, which is considered an indicator of short-term crude oil production, decreased for 7 consecutive weeks and fell to the lowest level since June 2016 between April 25 and May 1, indicating that the crude oil production of the USA will increase in the coming months. It also indicates that it will fall.
While the number of people applying for unemployment benefits for the first time in the USA due to Covid-19 has reached 33 million 483 thousand in the last 7 weeks, the US Federal Reserve (Fed) warns that the unemployment rate, which was at 4.4 percent as of March, may rise to 20 percent in the coming months. .
Billions of dollars of losses from companies
In the 19-month period when the barrel price of Brent type crude oil fell from 115 dollars in June 2014 to below 30 dollars in January 2016, losing more than 74 percent in value, approximately 250 billion dollars of investment in the US oil sector was lost, 300 thousand people lost employment, More than 250 small and medium-sized companies went bankrupt.
The fact that the barrel price of Brent type crude oil fell from 45 dollars to below 16 dollars in the 2-month period between March and April this year and lost more than 64 percent of its value in a very short time indicates that there will be greater losses in the US oil sector.
In the first quarter of the year, ExxonMobil, the largest oil company in the USA, announced a loss of 610 million dollars, and ConocoPhillips, the third largest oil company, announced a loss of 1.7 billion dollars. While ExxonMobil and Chevron plan to reduce their investment costs by $10 billion and $3.3 billion, respectively, this year compared to last year, ConocoPhillips announced that it will reduce its costs by more than $5 billion.
During this period, US Baker Hughes, one of the world’s largest oil field services companies, announced a loss of 10.2 billion dollars, Schlumberger 7.3 billion dollars and Halliburton 1 billion dollars.
Since the reserves in offshore fields are larger, this amount can go down to $25, but production from these projects takes longer and is more costly.
30 thousand oil workers may lose their jobs in Houston
It is estimated that 30 thousand people may lose their jobs in the oil industry in Houston, Texas, which is considered the energy center of the USA. This figure accounts for 12 percent of the workforce in the U.S. oil industry.
While the number of people applying for unemployment benefits for the first time in the USA due to Covid-19 has reached 33 million 483 thousand in the last 7 weeks, the US Federal Reserve (Fed) warns that the unemployment rate, which was at 4.4 percent as of March, may rise to 20 percent in the coming months. .
Additionally, international credit rating agency Moody’s predicts that the US economy will shrink by 2 percent this year compared to last year.
While the US economy contracted by 4.8 percent in the first quarter of the year compared to the same period last year due to Covid-19, the gross domestic product recorded its sharpest decline since the global financial crisis in 2008.
In order for US oil companies to cover their costs, the average barrel price of oil must be at least 45 dollars.
Source: https://www.aa.com.tr/tr/analiz/koronavirus-abd-enerji-sektorunu-sert-vurdu/1833482
