• 4 minutes Is The Three Gorges Dam on the Brink of Collapse?
  • 8 minutes The Coal Industry May Never Recover From The Pandemic
  • 11 minutes China Raids Bank and Investor Accounts
  • 5 hours In a Nutshell...
  • 7 hours During March, April, May the states with the highest infections/deaths were NY, NJ, Ma. . . . . Today (June) the three have the best numbers. How ? Herd immunity ?
  • 9 hours Is OilPrice a cover for Green Propganda
  • 10 mins Why Wind is pitiful for most regions on earth
  • 12 hours Putin Paid Militants to Kill US Troops
  • 2 days Victor Davis Hansen on Biden's mental acuity " . . unfit to serve". With 1 out of 5 Democrats admitting it. How many Dem's believe it but will not admit it?
  • 1 day Putin Forever: Russians Given Money As Vote That Could Extend Putin's Rule Draws To A Close
  • 7 hours Joe Biden to black radio host, " If you don't vote for me you ain't black". That's our Democratic Party nominee ?
  • 1 day Happy 4th of July!
  • 2 days Tesla Model 3 police cars pay for themselves faster than expected, says police chief
  • 1 day Apology Accepted!
  • 2 days The Political Genius of Donald Trump
  • 3 days Per most popular Indian websites it was Indian troops not Chinese troops breach of LAC that caused the clashes. If you know any Indian media that claim to the contrary please provide the link
Tesla’s Ambitious Plan To Ditch Cobalt

Tesla’s Ambitious Plan To Ditch Cobalt

Tesla is set to disrupt…

Oil Capped By COVID Fears

Oil Capped By COVID Fears

Oil prices rose this week…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

U.S. Oil Industry Could End Up Losing More Than 200,000 Jobs

With West Texas Intermediate below $30 a barrel and Saudi Arabia’s plans to keep pumping as much as it can for as long as it can, the U.S. oil industry is bracing for job losses that could end up in five-figure territory. “A sustained drop in oil prices would cost the sector 50,000-75,000 jobs if employment returned to its low from a few years ago,” the chief economist of PGIM Fixed Income, Nathan Sheets, told CNBC this week.

The last industry downturn caused by low prices cost the U.S. oil industry—including oilfield services—as many as 200,000 jobs. That was about a third of the total workforce employed in the sector. Now, the US oil industry could be headed for a rerun.

Companies, notably shale oil companies, are already beginning to trim costs in response to the oil price shock. Several companies have already announced spending cuts of between 25 and 50 percent for the year, and Halliburton has said it would furlough as many as 3,500 employees for two months. These are the first signs of an industry entrenching itself to survive the latest crisis. 

According to Rystad Energy, only five companies can drill new oil wells in the U.S. shale patch at a profit with WTI at $31 per barrel. With WTI now trading at below $24 a barrel, the number of unprofitable wells has increased substantially. One company has already asked oilfield service providers to slash the prices of their products and services by as much as a quarter and with oil in free fall, more are likely to follow.

In Texas, people are bracing for major job losses in the Eagle Ford play, the San Antonio Express reported this week. The daily cited energy analyst Paige Meyer from CFRA Research, who noted the situation was unprecedented.

Related: Oil Plunges As Saudis Boost Exports To Record High

“We have never seen this before — to have a demand shock and a supply shock at the same time,” Meyer told San Antonio Express.

Indeed, this time the odds are stacked high against the oil industry. The coronavirus outbreak that was declared a pandemic by the World Health Organization and that is prompting border closures, states of emergency, and travel bans has combined with the oil price war that broke out earlier this month between Saudi Arabia and Russia.

The combination has added enormous pressure to an industry that has already been having problems with investors looking for higher and more sustainable returns and a rising and increasingly hostile opposition against the core business of that industry from governments and activist groups demanding that oil companies stop doing what they were set up to do, which is to produce oil.

According to Meyer, as many as 21 U.S. oil companies had announced spending cuts of an average of 40 percent for the year. The spending cuts mean idling drilling rigs and with them, the crews that service them. The more the industry is squeezed by the unprofitable wells and the lack of cash—many companies are generating negative cash flows and have been doing so even before the oil price slumped this month—the more jobs will go.

One silver lining is that some companies at least might limit the job losses thanks to cash from oil hedging. Rystad Energy reported recently that 30 companies accounting for 38 percent of total U.S. production this year had hedged their output at an average price floor of $56 a barrel. This, according to the Norwegian consultancy, would make for hedging gains of some $10.5 billion if WTI stays below $40 for the rest of the year and even $17 billion if the U.S. benchmark trades at an average of $25 a barrel this year.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News