Trump’s Big Oil Deal Won’t Save the Weakest of Shale Producers – By Stephen Cunningham (Bloomberg) / April 12 2020
- U.S. contributing market-based declines to broad output deal
- Nearly 40% of producers face insolvency at $30 oil: survey
President Donald Trump said the “big Oil Deal” sealed on Sunday will save hundreds of thousands of American jobs. But the agreement he brokered depends on a sharp downturn in shale that will likely bring about a wave of bankruptcies and job cuts.
Days of frantic diplomatic maneuvering culminated in an agreement on Sunday by OPEC+ to pare production by 9.7 million barrels a day, ending a devastating price war between Saudi Arabia and Russia and belatedly tackling a plunge in demand caused by the coronavirus outbreak. The lockdowns enacted across much of the world to slow its spread have caused consumption to crater by as much as 35 million barrels a day.
Rather than agree to any formal cuts, Trump is counting on market forces to shave some 2 million barrels a day of overall U.S. output by the end of the year. U.S.-focused oil producers have already slashed more than $27 billion from drilling budgets this year and are starting to shut in production. That could spell the end for some shale explorers drowning in debt.
“Trump’s strategy seems to rely on the free market forcing production down and implicit in that is some companies going under,” said Dan Eberhart, a Trump donor and chief executive of drilling services company Canary Drilling Services.
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