Oil Will Go ‘’Bust’’ If Recession Hits
A recession will come – it has long been in the cards and the longer it takes for it to materialize, the harder it will be. What will happen then? Oil producers with high price production will be hit hardest – especially those with little option to cut cost. This will throw a wrench into many Russian oil projects as they are in the very deep Arctic which is a high price frontier. It will also put some Saudi EOR dependent fields in a bind as their marginal cost of keeping the pumps running will be too high to keep them on. And anyhow, as they need to cut deeper, they might use that as an excuse to switch those off. Which does not help with paying for the CAPEX spent but hey, it’s a crisis. We are going into an “everyone for himself” and shale will be hit as well. There will be blood – but they have managed to get by so far when the weather was anything but fair so they will soldier on and wait it out …
Oil prices plunged again on Thursday, dragged down by fears of slowing demand. An unexpected increase in inventories underscored the downside risk to oil prices. The EIA reported a drawdown in crude stocks, but a huge 9.25 million barrel combined increase in gasoline and diesel inventories, which surprised traders.
