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The Oil Price War Begins

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| Monday,March 09,2020

Oil prices fell this weekend from Friday's lows of $43 WTI to $32 WTI (early morning trading) - a decrease of 26%.

This is in large part to Russia's decision last Friday to not support OPEC's 1.5 million barrel per day oil production (mmbbls/d).

Let's revisit what happened over the last month:

2/10/2020: Even as the Coronavirus decimated oil demand, U.S. E&Ps guided that they plan on growing light oil by +8% (roughly 600,000 - 700,000 barrels per day).

2/28/2020: U.S. places sanctions on Rosneft over alleged Venezuela oil exports.

3/6/2020: Russia says no to OPEC's proposed 1.5 MMbbl/d cut and oil falls to $43.

3/7/2020: Saudi Arabia cuts April crude oil prices

3/9/2020: Crude oil falls (-23%) from Friday close to $32 by Sunday.

U.S. E&Ps Already Responding to $30s WTI

This morning, a large Permian E&P said it plans to cut it rig count from 21 to 18 and reduced it frac fleets to 6 from the 9.

We expect more companies to respond by cutting drilling and completion programs over the next few days / weeks.

Eyes are on companies like EOG Resources, who has no hedges in place and is currently operating 31 rigs, and plans to grow oil (+10%).

Centennial Resources and Continental Resources, who both operate 6 & 18 rigs, respectively, will also have to reduce activity significantly as well.

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