The next chapter in the coronavirus-related oil crisis is now inevitable: Large parts of the petroleum industry are about to start shutting down.
Oil futures dived below zero for the first time ever amid the coronavirus-triggered economic turmoil.The price shock has been particularly intense in the physical market: Producers of crude streams such as South Texas Sour and Eastern Kansas Common had to pay more than $50 a barrel to offload their output last week. ConocoPhillips and shale producer Continental Resources Inc. have announced plans to shut in output.
North Dakota, which for years was synonymous with the U.S. shale revolution, is witnessing a rapid retrenchment. Oil producers have already closed more than 6,000 wells, curtailing about 405,000 barrels a day in production, or about 30% of the state’s total. The output cuts won’t be limited to the U.S. From Chad, a poor and landlocked country in Africa, to Vietnam and Brazil, producers are now either reducing output or making plans to do so.
“I wouldn’t want to get sensational about it but yes, clearly there must be a risk of shut ins,” Mitch Flegg, the head of North Sea oil company Serica Energy, said in an interview. “In certain parts of the world it is a real and present risk.”In emergency board meetings last week, oil companies small and large discussed an outlook that’s the most somber any oil executive has ever witnessed. For the small firms, the next few weeks will be all about staying afloat.
Saudi Arabia, Russia and the rest of the OPEC+ alliance will join the output cuts Friday, slashing their output by more than 20%, or 9.7 million barrels a day. Saudi Aramco, the state-owned company, is already
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