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Oil And Shale Are In A Tough Spot

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Oil And Shale Are In A Tough Spot

The recent oil price war between Russia and Saudi Arabia has President Trump caught in tough spot. One the one hand, cheaper oil prices are good for consumers and industries that rely on oil to function. But the 17-year lows in oil is also hurting oil producing countries, of which the U.S. is one of the largest, as well as oil and gas companies handcuffed by the commodity's massive drop. 

For corporations, Things Are Going South

Whiting Petroleum Corporation (NYSE: WLL), a big shale oil producer in North Dakota, has filed for bankruptcy protection. The oil industry has taken the greatest hit possibly since the Great Depression, hammered by both COVID-19 pandemic and the price war that has resulted in a massive oversupply of oil and limited demand. 

The United States Between Oil Gambit of Russia and Saudi Arabia – Package of Salvation

Meanwhile, President Trump met oil executives on Friday, including U.S. oil giants, such as ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), Occidental Petroleum (NYSE: OXY) and Continental Resources (NYSE: CLR). The subject of the meeting was to grant access to government programs, aimed to help the companies deal with the hit of the coronavirus pandemic. The U.S. oil industry is highly diversified, with more than 6,000 oil companies, from small oil drillers from North Dakota to Texas, to oil giants such as ExxonMobil and Chevron. Mr. Sommers, CEO of the American Petroleum Institute, said that since oil companies are operating in a market economy, no restrictions on production should be imposed. However, he greeted the opportunity for small oil companies to get access to Small Business Administration loans, while larger companies should be entitled to the gigantic $2 trillion package that was enacted last week. These measures should ensure liquidity that the oil sector needs to survive the epic plunge in demand.

Trump's Attempt at Shuttle Diplomacy

Alongside the domestic oil producers' meetings, President Trump has tried to act as an intermediary by speaking to the Russians and  Saudis on a compromise. Trump has called for oil production cuts in an effort to bolster already shaken oil prices. Oil prices surged 20% on Friday on news of a potential supply cut, from $21.92 to $26.42 per barrel and currently are holding at approximately $26 per barrel.

But the problem is that Dmitri S. Peskov, President Putin's spokesman has denied any contact between President Putin and Saudi crown prince took place as well as any sort of agreement. So we will need to wait and see what is the actual deal and in which way will it be put into practice.

The shale oil industry is even more vulnerable due to the high production costs and the United States being the largest shale oil producer. The fact is that oil prices below $50 per barrel is dangerous for the shale oil industry, and at this moment, there are no indications that things will get better anytime soon. We'll see what happens when OPEC+ meets on Thursday. 

This article is not a press release and is contributed by Ivana Popovic who is a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure . Ivana Popovic does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you're interested in becoming an IAM journalist contact: contributors@iamnewswire.com Questions about this release can be send to ivana@iamnewswire.com

The post Is Shale About to Fail Due to Oil Wars? appeared first on IAM Newswire.

Photo by Zbynek Burival on Unsplash

 

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