October provides more fright for oil industry
October proved to be one more scary month for the oil and gas industry, which continues to suffer through one of the worst downturns in history.
Crude prices Friday were on their way to their worst monthly decline since March, when the coronavirus pandemic began to sweep across the U.S. West Texas Intermediate, the U.S. benchmark, which closed September at just a fraction over $40 a barrel, had dipped to nearly $35 a barrel by Friday afternoon.
A record surge in daily coronavirus infections in the U.S. has clouded hopes for a rebound in demand, while governments in Europe have increased measures and restrictions to contain the spread of the virus, prompting further reductions in already anemic airline capacity for the rest of 2020.
“Over the course of this month, it was a sea change in sentiment,” said John Kilduff, a partner at Again Capital LLC. “The flareups in COVID-19 cases took all the air out of the balloon in terms of a complete, almost opposite viewpoint that was emerging that there was good news on the treatment front.”
The resurgence in the pandemic is threatening to upend a fragile recovery for oil demand as governments dial back reopening plans.
The gloomy prospects for demand added to another string of industry losses during the third quarter, such as Friday’s reports from giants Exxon Mobil and Chevron.
Irving-based Exxon, the nation’s largest oil company, said Friday that it lost $680 million in the three months ended Sept. 30. The results were an improvement on its $1 billion loss for the second quarter, during the depths of the downturn, but still a far cry from the $3.2 billion profit it made during the third quarter of 2019, when oil was just above $50 a barrel.
California oil giant Chevron, meanwhile, lost $207 million during the quarter, compared with a second quarter loss of $8.3 billion but still significantly off the $2.6 billion it made in the year-earlier period.
There were small signs of improvement during the past month, such as booming freight markets and improvements in China and India.
And closer to home, an industry trade group announced last month that Texas added 700 oil and gas extraction jobs in September, the first uptick since the pandemic broke out.
“At a time when some question the future of oil and natural gas, this small but positive job growth is an indicator of better days ahead,” said Todd Staples, president of the Texas Oil and Gas Association. “This industry is indispensable to our daily lives and will be a valuable part of the energy mix for future generations.”
But news of the additional jobs was quickly overshadowed Thursday by Exxon’s announcement that it would lay off 1,900 workers in the United States — with most of the job cuts coming in Houston, where the company employs 12,000.
“The impact of COVID-19 on the demand for Exxon Mobil’s products has increased the urgency of the ongoing efficiency work,” the company said in a statement.