Almost 40% of
Energy companies surveyed during the second half of March said they expect just 61% of firms to remain solvent this year if West Texas Intermediate crude stays at $30. That edges up to a 64% survival rate if prices rise to $40 a barrel, according to a report released Tuesday.
“Expectations for future activity also fell to their lowest level since late 2014, as most firms do not expect energy prices to return to profitable levels this year,” said
The abysmal responses echo a similarly negative survey released by the Dallas Fed last week. While the Dallas bank’s district encompasses activity in America’s biggest oil-producing state, the Kansas City Fed serves crude-dependent Oklahoma, Wyoming and northern New Mexico.
“The oilfield is generally highly leveraged and these commodity prices will not sustain the bulk of firms in the industry,” one unidentified respondent said.
Oil prices have collapsed this year, dipping as low as $19.27 last week, as demand reels from the global coronavirus pandemic and the Saudi-Russia price war. In March alone,
Respondents to the Kansas City Fed survey on average expected oil prices to reach $33 in six months. U.S. crude futures traded just below $26 on Tuesday afternoon in New York.
“We cannot continue producing oil below the cost to produce it,” said another respondent.
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Joe Carroll, Joe Richter
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