Oil Falls 90% to $1 per Barrel - Impact on O&G IB?
Just today, front month contracts for WTI have fallen to $1 per barrel with potential to go negative by the end of the trading day. Does anyone have any info on the future of Houston O&G banking in this price environment? Is Houston O&G going to die a slow death or is there potential to shift to renewables?
buy oil calls
You gonna long the June contract? or take physical possession of thousands of barrels May 1st?
Oil is not going to die a slow death at prices many multiples cheaper than renewables. This is a market meltdown over lack of storage. 30-50% of producers, especially those highly levered or unhedged, will get crushed but oil demand will be back eventually.
June/July futures are down significantly, but are still $20ish. To not have a rerun of this in 4 weeks, you will need to see widespread shut-ins across any unhedged production as it doesn't look like demand is changing in a serious way until maybe July.
As far as IB goes, there will be RX work and the majors may do some land acquisitions. There could be some major mergers in the next couple of years (Chevron could finally get Anadarko, with Oxy as a bonus).
The 10 year IB forecast, in my opinion, is cloudy. It doesn't look like the capital markets are excited by the returns profile and its an easy win to claim ESG at the same time.
We will still need crude for the next century, with demand even expected to increase (pre-covid) for the next 20 years. And energy is a capital intensive space that will always need investment. However, the glory days are behind us and it looks more like automakers, tobacco, and railroads.