When Will The U.S. Oil Industry Recover from COVID-19 Induced Slump?


  • Oil market downturns drag down a list of oil-producing countries and affected its markets.
  • 25 emerging market currencies are trading the highest in 15 years against Brent crude.
  • It will take a few months for the market to recover from COVID-19 induced slump.
  • U.S. rig count has fallen to 465 on April 24 down 45 percent in just five weeks.

According to an article published in Oil Price, the industry is wondering when will the U.S. oil storage reach its limit.

EM currencies hold up against oil

  • Sixteen of 25 emerging market currencies analyzed by Bloomberg are trading near their highest levels in 15 years against Brent crude.
  • Typically, oil market downturns drag down a list of oil-producing countries, and the impact bleeds over into broader emerging-market assets.
  • The data suggests that EM assets are right now tracking economic performances, with an obvious eye on the pandemic. But notably, oil is doing very little to their currencies.

If the virus is contained in the next few months and we get a strong economic recovery, I would expect EMFX to outperform oil prices, Brendan McKenna, a currency strategist at Wells Fargo Securities in New York, told Bloomberg.

Rig count nears all-time low

  • The U.S. rig count has utterly collapsed, falling to 465 on April 24, down 45 percent in just five weeks.
  • The rig count is now closing in on the all-time low of 404 (reached in 2016), dating back 70 years. The low point before that was 488 in 1999.

Permian activity is now less than half that needed to offset declines; we estimate Permian oil liquids output will fall 1.08mb/d (23%) by year-end at current activity levels, Standard Chartered said in a note.

  • The bank estimates that output in the Bakken will fall from 1.39 mb/d in April to 1.03 mb/d in December.
  • The output in the Eagle Ford to fall from 1.34 mb/d to 0.87 mb/d over the same.

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Source: OilPrice


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