Oil and gas bosses to push for Covid-19 resilience package in wake of latest oil price crash

Industry leaders have promised to push governments to introduce a Covid-19 resilience package after US crude prices dropped below zero for the first time in history.

Head of Oil and Gas UK, Deirdre Michie, described the crash as a “body blow” for the industry and said it threatens their ability to deliver the energy transition.

The price barrel of West Texas Intermediate (WTI) dropped into the negatives late last night and at one point was sitting below -$30 a barrel.

The dive has been caused by a lack of demand due to the coronavirus lockdown, as well as concerns over a deficit of storage space.

As of around 10am this morning, WTI was sitting at just below -$1.9, while a barrel of Brent, which is the global benchmark, had fallen to just over $21 as of around 11am.

Ms Michie said: “While we have anticipated continued pressures on oil markets, there’s no getting away from the fact that this situation is a body blow for an industry already creaking under the strains of the impact of COVID-19 and sustained low commodity prices.

“The dynamics of this US market are different from those directly driving UK produced Brent, but we will not escape the impact. Ours is not just a trading market; every penny lost spells more uncertainty over jobs, our contribution to public services and to the just transition we all want to see. OGUK will be pressing the case for a COVID-19 resilience package to governments in the coming days which will focus on protecting the supply chain, jobs and our ability to continue to reposition ourselves for the future.”

Aberdeen-based Derek Leith, EY’s Global Lead for Oil and Gas Tax, said: “The significant fall in the US oil price has been the result of a combination of factors which has been intensified by the US share of an unparalleled drop in global demand of 25-30% in this quarter alone, due to the global COVID-19 lockdown.

“The WTI price drop is not reflective of the oil and gas industry worldwide but is very specifically driven by the production and demand imbalance in the US.

“OPEC+ have agreed cuts to supply which will shift things in the right direction, but these do not commence until 1 May.   In the medium term this action should be enough to rebalance the relationship between supply and demand as global demand will increase as the COVID-19 lockdown comes to an end. However, we should expect a lot of volatility over the next couple of months and for crude prices to sit in the lower range as we experience a supply overhang of as much as 15 million barrels a day.

“While yesterday’s WTI prices won’t directly impact on the UKCS, this is a stark reminder of oil price volatility, and that smaller UKCS producers may find it very hard to sell their crude at the prevailing market rate.”

Source: originalfm.com

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