Winter Garden Today

The fracking revolution has involuntarily ground to a halt as producers across the nation suddenly have more product than markets available.

Demand has plummeted with the onset of the COVID-19 virus, which has reduced travel along the highways and through the skies. The problem was exacerbated when OPEC and Russia were unable to come to an agreement on dropping production, which sent prices plummeting to depths never known before.

The New York Times reports fuel demand has dropped by as much as 30 million barrels per day, which leaves producers concerned they will be left without a chair when the music stops. Put simply, it is time to unload oil.

“What scares me is not even being able to sell the product,” Texas oilman Mike Shellman told the Times.

President Donald Trump heralded a deal designed to save jobs as overall production by OPEC and Russia. That did not lead to lower prices by Saudi Arabia as prices continued to drop, ultimately hitting negative $37 in trading on the black market before rebounding once again.

The damage has been done in terms of employment. The Times reported spending on oil field services is expected to fall 21% to $211 billion this year, the lowest since 2011. Those producers that are not hedged will be vulnerable financially. Raoul Nowitz, head of restructuring at SOLIC Capital Advisors, provided a prediction of 60 oil producers seeking productions from creditors to the Times. Many, he said, would not emerge under new owners.

The outlook for the immediate future is poor with production expected to drop 500,000 barrels per day and another 700,000 barrels per day in 2021 according to the Times.

A lot of damage has already been done with oilfield giants such as Halliburton announcing the closure of camps and furloughing of employees. It is a common story throughout a struggling oil patch that has taken a shot like it never has before in its history highs and lows.

It has gotten so bad Shellman, who owns MCA Petroleum, is telling friends that it is time to leave the business where he has spent a lifetime.

“It’s never going to be like it was,” he told the Times.