Oil & Gas Industry Bloodbath Just Getting Started; Global Production 30 MBD Higher Than Demand [View all]

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“We are worried that the current disorderly market has adversely damaged the industry,” said Ben Luckock, co-head of oil trading at Trafigura, a large exporter of American crude. “In the short term some form of government assistance is likely needed because the price levels we are currently transacting at are unsustainable for U.S. producers.” The reverberations to other industries could be significant. A decade or two ago, low oil prices would serve to bolster the American economy by reducing energy costs. But the oil industry has become so big and important — it directly and indirectly employs 10 million people — that its problems will deal a blow to many kinds of businesses, including manufacturers that build its equipment, steel companies that make its pipes and banks and hedge funds that lend it money.

President Trump has said that he stands ready to help U.S. oil and gas businesses, a position he reiterated on Tuesday. But the policies he and other administration officials have proposed — imposing tariffs on foreign oil or filling the Strategic Petroleum Reserve — would do so little that their impact would amount to a rounding error.

Simply put, the global oil industry is producing vastly more oil than the world needs — about 30 million barrels a day too much. Even if the federal government started buying oil for the reserve immediately, it could absorb only half a million barrels a day, or less than 2 percent of the excess world production. Some industry executives had pinned their hopes on the Texas Railroad Commission, asking it to exercise a power it has not used since 1973 to force oil companies in the state to cut production. But the commission, which regulates the industry there, declined to do so at a meeting held by videoconference on Tuesday, with two of its three commissioners saying that they needed more legal advice before making a decision.

All the while, the glut of oil keeps growing. And refineries, storage tank hubs and pipelines are quickly filling to the brim, while ocean tankers carrying as much as 300 million barrels of oil are floating or sailing figure-eights waiting for buyers.

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https://www.nytimes.com/2020/04/21/business/energy-environment/coronavirus-oil-prices-collapse.html