The American oil industry is facing a doomsday scenario, EDNews.net reports citing CNN.
The coronavirus pandemic has caused oil demand to drop so rapidly that the world is running out of room to store barrels. At the same time, Russia and Saudi Arabia flooded the world with excess supply.
That double black swan has caused oil prices to collapse to levels that make it impossible for US shale oil companies to make money. US crude for May delivery turned negative on Monday -- something that has never happened since NYMEX oil futures began trading in 1983. It was easily the oil market's worst day on record.
US crude for June delivery is still trading above $20 a barrel — but even that's disastrous.
"$30 is already quite bad, but once you get to $20 or even $10, it's a complete nightmare," said Artem Abramov, head of shale research at Rystad Energy.
Many oil companies took on too much debt during the good times. Some of them won't be able to survive this historic downturn.
In a $20 oil environment, 533 US oil exploration and production companies will file for bankruptcy by the end of 2021, according to Rystad Energy. At $10, there would be more than 1,100 bankruptcies, Rystad estimates.
"At $10, almost every US E&P company that has debt will have to file Chapter 11 or consider strategic opportunities," Abramov said.
