The Permian basin spans across Texas and New Mexico, about the size of Britain. It contributes one-third of US oil production.
|The Permian region is the largest oil field in the United States.|
In the past, the region supplied oil to the United States and its allies during World War II. In the 1970s, it created so many millionaires that there was not enough land to park private aircraft.
Permian oil contributes 10% of the Texas economy, including production, services, transportation and refining. However, when the world is in excess of oil, and demand is rare, this place is experiencing an unprecedented shock.
During the crisis caused by the COVID-19 epidemic, most companies operating in the Permian had to stop operating at least 10% of their oil wells, with local oil prices falling to 5. USD / carton.
CEOs in smaller companies say they are planning to temporarily close all wells in the next few weeks. Oil refineries, though temporarily shut down, still have no room in the storage.
Earlier this year, the Permian region produced 5 million barrels of oil a day – up from a modest 850,000 barrels a day at the beginning of the shale revolution in 2007. Manufacturers expected output to fall. by at least 1 million bpd by the end of this summer. And maybe by the end of 2021, production is only about 3.5 million barrels a day.
This is an area that has received unprecedentedly large investments from energy giants such as Exxon Mobil, Chevron, BP and Royal Dutch Shell after the miraculous revival by applying hydraulic cutting technology. . But, now there are only 26 workers in the Permian, down from 47 in March and 127 in January this year.
Oil CEOs are desperate to try to save their businesses – most of them are overloaded with debt. More than 10,000 workers in Midland and Odessa (two industrial centers in West Texas) had to quit their jobs.
Chairman of Texland Petroleum said that the Company has no more places to consume for 7,000 barrels of oil produced every day, and plans to stop operating 1,211 oil wells in the next few days.
Matthew Hale, President of S.O.C Industries, which has been operating in the Permian for 19 years, said: “We have also experienced many ups and downs in the past 20 years, but this time is really different. We worry about our industry and our survival. ”
“The future market is telling us not to drill any more wells,” said Scott Sheffield, CEO of Pioneer Natural Resources (a major oil producer in Permian). new oil wells until WTI oil prices return to 35-40 USD “.
This oil price now fluctuates at 20 USD / barrel after falling to negative 37 USD.
Big companies like Exxon Mobil and Chevron will continue to produce but at lower levels. As drilling operations go down, this will affect the entire network of suppliers, truck drivers, repair shops and a host of other companies.
The workers who work in the oil field have a very good life. But now, for the first time in their lives, they’re lining up at a local food delivery center because energy prices are falling uncontrollably.
The Permian region saw a crisis in the 1980s, when the price of crude oil fell by nearly 80%, most of the oil producers in Permian and major banks in Texas were devastated.
During the Great Depression of 1930, oil prices fell to 13 cents per barrel (about US $ 2 today).
Number of drilling rigs in the world closed up to 30%
While the world’s leading economy was in recession, other countries were in similar tragedy.
According to Baker Hughes’ report, the number of oil rigs around the world also dropped by nearly 30%.
A report released on May 1 showed that the number of active oil rigs dropped to 1,514 in April, down approximately 30% from the same period last year. Compared to the end of March, this figure has also decreased by 23%.
In the US, the number of rigs decreased by 44% compared to the same period last year, as of the end of April to 566.
|Many rigs in Permian were closed.|
After falling to a negative level last week due to a lack of storage facilities, oil prices have rebounded on signs that demand could rise after the global economy began to reopen. In the US, over the weekend, oil prices traded at $ 20 / barrel.
Warehouses in Cushing, Oklahoma were full and the Covid-19 pandemic all contributed to a record-breaking WTI oil price. Crude inventories demand also increased slower than expected. However, some supportive information shows that oil demand will recover.
On April 29, the US Energy Information Administration said oil inventories rose 9 million barrels last week, albeit lower than analysts’ forecast of 10.6 million barrels.
Many major economies are moving to lift the most stringent isolation measures. Some US states are taking measures such as reopening unnecessary stores, at the same time, some European countries are taking similar steps. This reopening has boosted investment sentiment, creating expectations that oil demand is likely to increase in the coming weeks.
World crude oil price at the beginning of Monday morning (May 4, Vietnam time) dropped sharply for both WTI and Brent.
WTI light sweet crude oil contract delivered in June plunged 7.74% and lost 1.53 USD, to 18.25 USD / barrel; July contract fell 1.3 USD, to 20.99 USD / barrel; August delivery also dropped 1.1 USD, trading at 23.1 USD / barrel.
Brent oil delivered in July lost 0.81 USD, equivalent to 3.21%, to 25.57 USD / barrel; August contract fell 0.89 USD, to 27.18 USD / barrel.
According to Reuters, the US crude oil contracts continued to decline in the first trading session of the week, showing that the concern about oil supply is quite large. Although before that, some major oil and gas companies in the world agreed to cut production under the agreement of OPEC + countries.