Permian Bankruptcies Could Fuel A Buying Spree For Big Oil
The United States shale revolution is over. Production in the Permian Basin, which spreads across West Texas and Southeast New Mexico, has been slowing for months, but the novel coronavirus took things from bad to much, much worse for U.S. shale. The oil price shock that followed the spread of the COVID-19 pandemic, combined with a massive global oil glut spurred by a spat between with learning OPEC+ member countries of Russia and Saudi Arabia, drove West Texas Intermediate oil prices down to a previously unthinkable -$37.63 a barrel earlier this month. While shale prices have since moderately rebounded, the Permian Basin is still in bad shape. The oil fields that made the United States the biggest crude oil producer in the world is now seeing tens of thousands of fired and furloughed employees as the region is rocked by a sweep of bankruptcies across the shale sector. Last week CNBC reported that “the oil industry shakeout is just beginning with more production cuts and bankruptcies ahead,” detailing that “U.S. oil companies are already paring back spending and closing wells, but wild trading in the futures market was a warning to curb production now because the world at some point will not be able to store any more supply.”
Just because the U.S. oil industry has hit a rough patch, however, doesn’t necessarily mean that the West Texas shale play is all played out. In fact, it stands to reason that, as competition dries up and blows away like so many tumbleweeds, Big Oil may step in and buy up faltering shale independents.
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