March 9, 2020 – Natural Gas Intelligence
Oil Price War Possibly a Positive for U.S. Natural Gas, Say Analysts
By Leticia Gonzales
An oil price war launched by the Organization of the Petroleum Exporting Countries (OPEC) and Russia battered crude oil and stocks Monday, but the long-term ramifications may not be all doom and gloom for natural gas, especially in the Permian Basin, according to analysts.
Read the full article here: https://www.naturalgasintel.com/articles/121273-coronavirus-wreaks-havoc-on-markets-enverus-more-optimistic-on-oil-demand
RBN Energy LLC CEO Rusty Braziel acknowledged that these will be hard times for U.S. E&Ps, with the weaker among them facing bankruptcy and the stronger hunkering down to weather the storm. However, “even though we are witnessing unprecedented market conditions, it’s not Armageddon,” Braziel said.
Backing up his rationale, the RBN chief noted that it may take some time for lower prices to have a significant detrimental impact on crude oil production. Also, U.S. producers can get very creative when in survival mode, as they did during the last oil price crash in late 2014. “Though, it’s got to be acknowledged that market conditions this time around do look formidable and many of the E&Ps’ rabbits may already have been pulled out of their hats,” Braziel said.
Furthermore, low prices do not make oil and gas in the ground disappear, Braziel noted. They simply make it less profitable to extract therefore less of it gets extracted. “In effect, low prices motivate owners of that oil and gas (producers holding reserves) to put that production on hold -- to ‘store it in the rock,’ you might say -- and wait to withdraw it until the price is right.”
Braziel said the market likely is facing a similar situation to the collapse nearly six years ago, when low prices cut production for a time, but a subsequent rebound in prices spurred producers to renew drilling programs and improve productivity. “Sadly, it may not be the same E&Ps, since the weaker among them are unlikely to survive the 2020 downturn. But others will. They’ll pick up the assets left behind by the shuttered companies for a song, and be well-positioned for an eventual recovery.”
