Oil Analyst Predicts Industry Bounce Back after Pandemic, but Maybe Fewer Shale Producers
A prominent industry analyst is not forecasting a permanent decrease in demand for oil after the COVID-19 pandemic.
Strategic Energy and Economic Research President Mike Lynch said during an Oil and Gas Journal webcast while many people are working from home or out of work now, he doesn't expect that or decreased travel to continue.
"After the pandemic, life will return more or less to normal. The oil industry will still be suffering from low prices for some time. It’s not clear how long, but I do not think we’re going to see a major revolution in lifestyles or the economy or the oil industry," Lynch said.
Lynch said there may be consequences, however, of lower demand and suppressed prices for shale oil producers. He said shale production isn’t really profitable when oil is less than $50 a barrel and believes there will be some consolidation.
"Large operations where they can reduce their administrative costs and get economies of scale for things like pipeline distribution and so forth, those are going to be the ones that survive. It’s kind of like the farming sector where the little guys tend to get squeezed out because of price volatility and the big guys get bigger," Lynch said.
Depressed production now and fewer producers later will also hurt companies providing oilfield services.
At last count, Oklahoma had just 11 active oil and gas rigs. At the close of trading on Tuesday, West Texas Intermediate Crude was less than $43.