Gulf companies stop oil production

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The fall in oil prices due to the COVID-19 pandemic has led to a reduction in refining volumes and spare oil storage capacities


Oil companies began to close wells in the US Gulf of Mexico due to the collapse in oil prices triggered by the COVID-19 pandemic.


It is noted that companies are forced to close both shallow and deep-water wells with high oil production costs.


In 2019, offshore projects accounted for approximately 15% of US oil production, or about 2 million barrels per day, a record for offshore production in the country.


Experts say shutting down offshore operations may have more long-term effects than reducing oil production domestically, such as in the Permian Basin of Texas and New Mexico, the US shale production center. In this case, the management of oil companies fears that full recovery of production can take years.


Well closures and cost reductions by many manufacturers have led oil service companies, including Schlumberger Ltd., Halliburton Co. and Baker Hughes Co., began to cut jobs.


For offshore companies, the costs of oil production and transportation are higher than for offshore producers. Usually, they offset these costs through premiums on the price of oil shipped to hubs in Texas and Louisiana, given the high demand for these supplies from US refiners.


US oil production fell 100,000 bps last week to 12.2 million bps. Also, an Oklahoma industry regulator said oil producers could close wells without losing rent. It is assumed that such a move will limit the growth of oil supplies.

Because of the spread of the coronavirus, global demand for oil has fallen by a third, with prices falling to the end of March in 2002.

On April 12, OPEC +, which includes OPEC countries, Russia and other oil-producing nations, agreed to reduce oil production by 9.7 million barrels a day in May-June. But as long as the market remains overflowing with oil.

On April 20, the price of the May WTI futures fell almost 300%, dropping to minus $ 37.63 a barrel.

Today, Brent and WTI benchmarks are on the news of Kuwait's shrinking exports and a new US anti-crisis package.



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