Oil companies oil price
Large oil companies prepare for oil price at USD10 per barrel
MOSCOW – Large oil companies were hit by a wave of cost reductions, as oil prices ranged from USD20 to USD30 per barrel, Vesti writes.
On Monday, Royal Dutch Shell said it would cut costs by 20%, or USD5 billion, and also suspend its share buyback plan. The French oil giant Total SA and the Norwegian company Equinor are going to take similar steps.Oil companies oil price
ExxonMobil and Chevron have suggested that they also cut budgets, with Exxon experiencing particular pressure. Goldman Sachs estimates that Chevron needs a price of USD50 per barrel to cover costs. Oil companies oil price
ExxonMobil needs a price of about USD70.
Large companies are relatively more protected from recession than small and medium-sized shale drillers. They have oil refining assets, which, during a period of declining prices, are usually more efficient than producing ones.
For example, refineries spend less on oil during a recession, while lower prices contribute to increased sales of petroleum products.Oil companies oil price
However, this time, large companies do not have such an airbag. Now is the height of the supply and demand crisis. Oil consumption could fall by 10 million barrels per day or more. It doesn’t matter how cheap the oil is. Oil companies oil price
If people do not travel, do not fly on airplanes and their consumption level is limited by the most necessary, there will be no growth in demand even against the background of low prices. Oil companies oil price
On Monday, Exxon announced that it was cutting production at the Baton Rouge refinery, because of low demand because the tanks were full. Exxon also cut 1,800 contractors. Another major petrochemical project in the Appalachians will also not be able to develop in the near future, as the market situation worsens.
The first round of oil industry spending cuts is obvious. However, the second round begins, notes Goldman Sachs.Oil companies oil price
“It is worth preparing for a decrease in US oil production by 1.4 million barrels per day for five quarters after the second quarter of 2020 amid a decrease in drilling volumes. At the same time, the company’s capital expenditures decreased by 35% in 2020,” writes Goldman Sachs.
However, the budget review is still ongoing. Decrease in expenses, drilling and production volumes may intensify against the background of a more noticeable reduction in capital expenditures. “US oil activity will collapse, oil prices will be well below USD30,” said Raymond James. Oil companies oil price
According to the bank, the initial round of reduction led to the fact that expenses fell 45% below the level of 2019. “Nevertheless, the decline will be much more severe than these initial reductions …
The total amount of capital investment in the United States may fall by more than 65%, and WTI will remain at the level of USD20,” the investment bank concluded.
Rystad Energy delivered a similar assessment on Monday. Oil exploration and production companies may reduce approved projects to USD131 billion, or about 68% year on year, according to a company based in Oslo.
“Mining companies will need to carefully analyze their cost levels and investment plans to counter the financial impact of lower prices and demand. Companies have already begun to cut annual capital expenditures for 2020,” notes Odun Martinsen of Rystad Energy.
No one knows how low the price of WTI and Brent can be. But several analysts have already noted that overcrowded storages may become the cause of a possible fall in prices. “No one can be sure that production will be quickly reduced without impairing our ability to store oil,” a JBC Energy note said.Oil companies oil price
The firm had in mind reductions in refineries, such as the Exxon Baton Rouge plant, as they ran out of stock. “In such circumstances, Brent could briefly reach $ 10 per barrel, as it was in 1986 or 1998,” concludes JBC.
Earlier it was reported that Russian oil companies, while maintaining current low oil prices, will be forced to overestimate new projects and may reduce investment in the least profitable fields. Against the background of the price war with Saudi Arabia and the influence of coronavirus, the price of the Russian Urals variety fell to the lowest level since 2002, less than USD19 per barrel, and the discount to Brent increased to USD4 per barrel.
Oil companies oil price