With the shock value of 20% to 80% capex cuts fading, producers might start pulling back production as the oil market keeps tightening and Saudi Arabia flexes its economic muscles.
The weak commodities environment won’t be the death knell of shale’s success story, but North American energy industry has hit the reset button.
New Moody’s report reveals that E&P companies are cutting capex by an aggregate 41%. Some 21% of Moody’s-rated E&P companies will reduce their capital budgets by more than 60% in 2015.
Industry veteran warns that the downturn could be a three-to-four-year issue—and much tougher than anticipated. "Make sure you have liquidity to 2018," he says.
Global oil and gas industry debt in 2014 rose 2.5x higher than eight years earlier. Now, as production increases, the value of oil backing the debt is falling, Bloomberg said.
Energy trade associations say the U.S. Environmental Protection Agency’s recent proposal for stricter air quality standards is premature and current standards have not been fully implemented.
Increasing production and Cushing storage nearing its capacity will likely contribute to crude’s price struggle during 2015, GHS macro strategist Richard Hastings said.
Price might need to deteriorate further for U.S. production to resume as some companies are building a war chest of wells ready to pump when WTI rebounds.
According to a Saudi Aramco executive, the $1 trillion figure included projects that might merely be delayed, not just those that could be cancelled outright, Reuters said.
Five of the biggest oil exchange-traded funds have seen their assets more than quadruple since July.
U.S. crude was trading comfortably above $51 a barrel in Singapore on March 5.
Anadarko Petroleum Corp. said it will reduce spending by about 33% this year.