The oil industry has been hit by a simultaneous demand and supply shock in March as the coronavirus pandemic cuts fuel consumption and top producer Saudi Arabia raises output to full capacity to fight a price war with rivals.
International crude oil prices have lost about 45% this month and fallen below the cost of much of the world’s production, causing energy companies worldwide to slash spending by tens of billions of dollars.
The collapse in demand and of energy diplomacy between Saudi Arabia, Russia and others have triggered unprecedented responses from governments and investors. Here are ten signs of an industry in distress.
SAUDI ARABIA GOES ALL-IN
Riyadh shocked the oil industry by going on the offensive after talks collapsed with Russia in early March on a deal to cut supply to compensate for how coronavirus was hitting demand.
Saudi Arabia slashed export prices and said it would pump at a record of 12.3 million barrels per day, pouring a flood of oil into a market that needed less. It lined up an armada of ships for export, targeting refiners that buy Russian crude, as well as the United States, wiping out profit margins for U.S. exports.
The moves were all the more shocking coming from a producer that for years has had a role akin to the industry’s central bank. The kingdom is the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC) and for decades adjusted output more than any other oil producer to keep markets balanced.
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