The coronavirus pandemic has forced many countries to cut production. However, American oil producers think only about their own profit. It seems that they are not interested in the world market situation. Despite the forced reduction in oil output, massive layoffs, and a series of bankruptcies, they still prefer to maintain and increase production, rather than cutting costs and obligations to creditors.
The Federal Reserve Bank of Dallas made an analysis, according to which 16% of oil executives intend to reduce debt. Another 16% intend to increase production, while 19% prefer to keep production at current levels.
Meanwhile, 32 companies have filed for bankruptcy since the beginning of the year, including Whiting Petroleum and Chesapeake Energy. In total, the company owed $49.7 billion, including $29 billion in unsecured debt.
Also, 66% of analysis's participants believe that the US oil market has peaked and will never reach the levels of early 2020 when the oil output exceeded 13 million barrels per day. Moreover, American oil workers fear the US presidential election. They believe that Biden's policies will deal a further blow to their sphere.
In other words, the leaders of oil companies prefer to live in the present day, as there is no hope for a bright future. The main thing for them is to sell as much oil as possible while there is such an opportunity. And when the money runs out, they will declare themselves bankrupt. As simple as that.
In the meantime, oil prices are rising as investors hope for a recovery in demand. Earlier this week, the US Department of Energy reported a decrease in oil reserves in the country for the past week. Investors also hope that the second wave of coronavirus will not do as much damage as the first did.
Brent oil futures for November rose by 0.55% to trade at $42.17 per barrel, while November futures for WTI grew by 0.6% to settle at $40.55 per barrel.
However, prices may fall amid risks around the coronavirus and the resumption of oil production in Libya, which could lead to an oversupply. However, Iraq intends to reduce production as part of the OPEC+ deal. In other words, the market situation will not change. This has an impact on oil prices, Jeffrey Halley, senior market analyst at OANDA, said.
