Connect with us

Business

What Happens If U.S. Shale Goes Bust – OilPrice.com

Published

on



What Happens If U.S. Shale Goes Bust? | OilPrice.com

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

More Info

Trending Discussions

    Premium Content

    Shale rig

    This month has seen a spectacular oil price crash the likes of which we haven’t seen in decades. The last time we had since a single day oil price drop as drastic as Monday, March 9 was way back in 1991, when the U.S. launched airstrikes directed at the Iraqi military in response to the invasion of Kuwait. The price drop earlier this month was similarly staggering, with Brent benchmark global oil prices down by 22 percent and United States prices down by 20 percent.  This cataclysmic crash was caused by a perfect storm of market-spooking factors: the accelerating global spread of the COVID-19 coronavirus pandemic and the continuing oil price war being waged by Saudi Arabia after the OPEC+ alliance, which formed in 2016 to include Russia, imploded at the beginning of this month. The implosion itself was caused by coronavirus, as the plummeting oil demand caused by the industry- and economy-stalling pandemic led Russia and Saudi Arabia to initiate talks to address the issue, which subsequently led to bitter disagreement and an ultimate disbanding of the alliance and then an all-out price war. 

    The oil price war and subsequent crash have had devastating effects on U.S. shale, which was already struggling with diminishing profit margins. “Few U.S. shale firms can withstand prolonged oil price war,” Reuters proclaimed last week. “For the last five years, U.S. shale oil producers have been battling suppliers for lower costs and running equipment and crews hard to drive drilling costs down by about $20 a barrel,” the article reports. “The oil market rout last week, however, has left most shale firms facing prices below their costs of production.”

    Subsequent news out of the Permian Basin has been grim, with World Oil reporting this week that “Shale plays, oil patch see tens of thousands of layoffs across the industry.” According to analysis by Texas Railroad Commissioner Ryan Sitton, tens of thousands of oil industry workers are being laid off across Texas, and World Oil writes that “while workers in just about every industry are threatened by the economic slowdown, few are more at risk than those in the oil patch.”

    Related: Barclays Slashes Oil Price Forecast On Demand Shock

    This news is what is leading a lot of us to ask, what would happen if the U.S. shale industry goes bankrupt? This is exactly the question that Robert Rapier sets about answering in an opinion column for Forbes this week. “The real consequences of letting the U.S. shale industry fail is to hand global control of oil production back to Saudi Arabia. Millions of Americans will lose jobs, domestic oil production will fall, and our oil imports will soar. Saudi Arabia will then be free to once again withhold production to drive up the price.” While some shale companies in the U.S. will inevitably go bankrupt in the coming months, if too much of the industry fails it could have a lasting negative impact on the United States’ national security. Ultimately, he argues, letting U.S. oil collapse is far too risky in the short term, even if moving away from fossil fuels is, ultimately, a net good.

    “Look, you may think the U.S. oil industry deserves to go bankrupt. You may believe we should all be driving around in wind-powered electric vehicles or riding bicycles. But that’s not the world we live in today,” he writes. “Should we use less oil? Yes. And we will over time. But right now the U.S. still uses a lot of oil, and we will continue to do so for several years, even as we transition to electric vehicles.”

    On the other hand, as oil is proving to be an increasingly volatile sector, and even Saudi Aramco is talking about peak oil by mid-century, isn’t it high time to let go? As climate action increases, the Financial Times warning that this oil crash is “only a foretaste of what awaits energy industry,” maybe it’s time to read the writing on the wall and more seriously divest from oil in favor of creating jobs and infrastructure in more progressive and forward-leaning energy sectors.

    By Haley Zaremba for Oilprice.com

    More Top Reads From Oilprice.com:

    Download The Free Oilprice App Today


    Back to homepage

    <!–

    Trending Discussions

      –>

      Related posts

      Let’s block ads! (Why?)



      Source link

      Business

      China’s March Factory Outlook Jumps as Global Threat Looms – Yahoo Canada Finance

      Published

      on


      (Bloomberg) — Chinese manufacturing activity rebounded strongly in March, signaling that the world’s second-largest economy is restarting just as it faces a growing threat from slumping external demand.

      For manufacturing, the official purchasing managers’ index rose to 52.0 this month, according to data released by the National Bureau of Statistics on Tuesday. That’s up from a record low of 35.7 in February and above the 50 mark which signals improving conditions. The gauge covering services and construction was at 52.3.

      While the rise indicates better sentiment at Chinese factories, output remains a long way from normal. The survey asks firms to state how business was compared to last month, so the data just show that Chinese companies think things have improved from the sharpest contraction since at least 2005, when the series began.

      China is still expected to have an unprecedented economic contraction this quarter, something that would have been unthinkable before the viral outbreak. The outlook for the April-June period depends both on how quickly domestic demand can rebound now the virus is contained, and the strength of demand from overseas markets like the U.S. which are facing their own spikes in infections.

      “The number above 50 doesn’t mean that economic activity is fully resumed,” Zhang Liqun, a researcher at China Logistics Information Center, which helps compile the data, said in a statement on its website. “We need to fully understand the unprecedented austerity and complexity, and should pay great attention to the virus shocks on production and demand.”

      The Second Virus Shockwave Is Hitting China’s Factories Already

      S&P 500 futures erased gains after hitting their highs Tuesday morning after the data. Asian stocks were mixed.

      Chinese factories, which endured weeks of work suspensions in February after travel and trade stopped nationwide, are now facing canceled export orders as the pandemic hits the rest of the world.

      “While manufacturing PMI rebounded rapidly in March, the survey showed companies still face relatively big operational pressures,” the NBS said in a statement, adding that more firms are reporting funding shortages and falling demand than in February. “The global virus spread will hit the world economy and trade seriously and bring new, severe challenges to the Chinese economy.”

      A sub-index of new export orders rose to 46.4 in March, up from 28.7. A manufacturing employment indicator stood at 50.9, compared with 31.8 in February.

      What Bloomberg’s Economists Say…

      “Despite improving conditions, the Chinese economy has not returned to normal, and faces challenges unseen for decades on both domestic and external fronts. Policy support is likely to be stepped up, especially fiscal measures. We also expect more monetary policy easing.”

      — Chang Shu and David Qu, Bloomberg Economics

      See here for the full note

      Around the region data showed a mixed picture for industry. Japanese industrial output rose slightly in February from January, boosted by output of electronics in the period before the virus really started to hit global supply chains. Car production was down and total output is forecast to drop 5.3% this month.

      South Korean output dropped 3.8% in February from January, with much of that caused by a shortage of auto parts affecting car production, according to Citigroup economists.

      In China’s services and construction sectors, while the headline number rose above 50, much of the underlying activity was still in contraction, with employment at 47.7 and new export orders at 38.6. That indicates companies don’t want to hire before they can confirm there’s been a solid return of business activities, according to Iris Pang, Chief Greater China Economist at ING NV in Hong Kong.

      “This won’t change overall policy stance,” according to Zhou Hao, an economist at Commerzbank AG. “I think the government is looking at the hard data to determine the policy steps, which is probably pointing to further economic headwinds and more policy support.”

      (Adds markets in sixth paragraph, data on Japanese and South Korean output from 10th paragraph.)

      <p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For more articles like this, please visit us at bloomberg.com” data-reactid=”36″>For more articles like this, please visit us at bloomberg.com

      <p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Subscribe now to stay ahead with the most trusted business news source.” data-reactid=”37″>Subscribe now to stay ahead with the most trusted business news source.

      ©2020 Bloomberg L.P.

      Let’s block ads! (Why?)



      Source link

      Continue Reading

      Business

      China shows strong factory activity in March – MarketWatch

      Published

      on


      BEIJING–An official gauge of China’s manufacturing activity rebounded strongly in March as factory production resumed after the coronavirus epidemic was largely put under control in the country.

      The official manufacturing purchasing managers’ index rose to 52.0 in March from a record low of 35.7 in February, the National Bureau of Statistics said Tuesday. The 50 mark separates expansion of activity from contraction.

      The March result came in above the median forecast of 51.5 by economists surveyed by The Wall Street Journal. Purchasing by manufacturers is a leading indicator of business activity because factories buy supplies in anticipation of demand.

      The statistics bureau said the reading only reflects work resumption from February and it doesn’t mean China’s economic activity has returned to normal.

      The production subindex climbed to 54.1 from 27.8 in February. The new-export-orders subindex, a gauge of external demand, rose to 46.4 in March from 28.7 in February. The subindex measuring imports increased to 48.4 from February’s 31.9.

      The government has rolled out a slew of measures to help factories resume production and retain workers, including offering tax cuts and cash returns. The People’s Bank of China on Monday lowered a key interest rate in the country’s interbank market, the latest effort by Beijing to restart an economy struggling to recover due to the coronavirus.

      Let’s block ads! (Why?)



      Source link

      Continue Reading

      Business

      Most actively traded companies on the TSX – Yahoo Canada Finance

      Published

      on


      TORONTO — Some of the most active companies traded Monday on the Toronto Stock Exchange:

      <p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Toronto Stock Exchange (13,038.50, up 350.76 points.)” data-reactid=”13″>Toronto Stock Exchange (13,038.50, up 350.76 points.)

      Bombardier Inc. (TSX:BBD.B). Industrials. Down three cents, or 6.59 per cent, to 42.5 cents on 17.5 million shares.

      Suncor Energy Inc. (TSX:SU). Energy. Up $2.54, or 15.46 per cent, to $18.97 on 15.6 million shares.

      Canadian Natural Resources Ltd. (TSX:CNQ). Energy. Up $2.40, or 18.02 per cent, to $15.72 on 15.5 million shares.

      Aurora Cannabis Inc. (TSX:ACB). Health care. Down 17 cents, or 11.64 per cent, to $1.29 on 15.2 million shares.

      Cenovus Energy Inc. (TSX:CVE). Energy. Up six cents, or 2.55 per cent, to $2.41 on 11.4 million shares.

      MEG Energy Corp. (TSX:MEG). Energy. Up 27 cents, or 22.13 per cent, to $1.49 on 11.4 million shares.

      <p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Companies in the news:” data-reactid=”20″>Companies in the news:

      Transat AT. (TSX:TRZ). Down 74 cents or 7.8 per cent, to $8.75. The Competition Bureau’s warning about Air Canada’s proposed takeover of Transat AT Inc., which owns Air Transat, should be taken in context, analysts say. The watchdog said Friday that eliminating the rivalry between the two Montreal-based carriers would discourage competition by prompting higher prices and fewer services. Desjardins Securities analyst Benoit Poirier said he believes the purchase will still be approved “considering the companies’ willingness to address the bureau’s competition concerns,” such as potential dominance of airport slots.

      Canadian Imperial Bank of Commerce (TSX:CM). Up $1.33 to $79. An Ontario Superior Court judge has ruled against the CIBC in an overtime class-action lawsuit filed more than a decade ago. Judge Edward Belobaba found the bank liable for breaching its overtime obligations to a class of about 31,000 current and former tellers, personal bankers and other front-line workers in branches across Canada.

      Canadian Apartment Properties Real Estate Investment Trust. (TSX:CAR.UN). down 23 cents to $41.90. Some of Canada’s biggest landlords say they’re committed to working with tenants who have lost their job because of the coronavirus pandemic. Mark Kenney, CEO of Canadian Apartment Properties Real Estate Investment Trust, says the company is committed to working with those who have suddenly lost their job, and is “violently against” evicting anyone who’s in distress.

      Freshii Inc. (TSX:FRII). Down one cent to $1.23. Freshii Inc. is delaying the filing of its latest financial results as it deals with the COVID-19 pandemic and its impact on its restaurants and franchise partners. The company says it has also temporarily “streamlined its head office workforce” in a move to cut costs. It did not say how many people were affected. Freshii says the COVID-19 pandemic is expected to have a material impact on its business, operations and financial performance for at least the first half of 2020.

      Parkland Fuel Corp. (TSX:PKI). Up 85 cents or 3.5 per cent to $25.05. Parkland Fuel Corp. is cutting its 2020 capital spending budget by 52 per cent and trimming executive salaries in response to the uncertain economic impact of the novel coronavirus. The Calgary-based company, which sells fuel through more than 2,600 service stations throughout Canada and in the United States and Caribbean, says it plans to spend $275 million this year, down from its earlier guidance of $575 million.

      Air Canada (TSX:AC). Down 67 cents or four per cent to $1608. Air Canada will temporarily lay off more than 15,000 unionized workers beginning this week as the airline struggles with fallout from the COVID-19 pandemic. The layoffs will continue through April and May amid drastically reduced flight capacity from the Montreal-based airline. Air Canada says the two-month furloughs will affect about one-third of management and administrative and support staff, including head office employees, in addition to the front-line workers.

      This report by The Canadian Press was first published March 30, 2020.

      The Canadian Press

      Let’s block ads! (Why?)



      Source link

      Continue Reading

      Trending