by Chris White
Three of the largest oil companies in the United States are feeling the pain amid historically low crude prices, economic lockdowns and a pandemic that has killed tens of thousands of Americans.
Big oil is taking a big hit, but smaller oil companies might bear the brunt as the industry grinds to a halt. ConocoPhillips and Phillips 66 are the third- and fourth-largest producers in the country, and they announced on April 30 huge losses: ConocoPhillips lost $1.7 billion amid the downturn while Phillips 66 reported a first-quarter loss of $2.5 billion.
The Texas-based oil producer has seen tough times in the past, though negative prices are new and scary, ExxonMobil CEO Darren Woods said during an earnings call Friday.
“We’ve certainly weathered the ups and downs of many price cycles,” he said. “However, I have to say, we’ve never seen anything like what the world is experiencing today.”
Woods announced during the call that Exxon dropped a staggering $610 million during the first three months of 2020 as mayors, governors and city officials began initiating stay-at-home orders to slow the spread of the coronavirus pandemic, which originated in Wuhan, China, before hitting the United States, where it has reportedly killed nearly 70,000 people.
This is the first time Exxon has posted a loss in the past three decades, though the oil producer is expecting to dial down its Permian Basin oil rigs by about 75%, which is substantial given the speed with which demand dropped over the past month.
The bloodbath will help out Exxon and Chevron as they are likely to consolidate the energy sector as smaller firms fall by the wayside, analysts said.
“Ultimately what’s going to happen … is you’re going to have massive consolidation; they’re going to be able to buy assets incredibly cheap,” Boris Schlossberg, a managing director at BK Asset Management, said in April.
Prices plunged into the $30s in March as Saudi Arabia pushed for a cut in output to prop up prices, while Russia worked to infuse the market with hundreds of thousands of barrels of oil. Saudi Arabia relented and moved to increase output, kicking off a prolonged sell-off that roiled global markets.
The price of Western Canadian Select — which is typically transported via pipeline — tumbled to a little over $8 a barrel on April 1, according to S&P Global Platts, while the price of West Texas Intermediate fell to just above $10 a barrel at the end of March. Even worse, a firm that sells commodities reportedly bid less than $0 for Wyoming Asphalt Sour crude. Oil prices eventually tumbled below zero.
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Chris White is a reporter for the Daily Caller News Foundation.