Natural gas and oil prices, which have already been depressed, have dropped even lower on the back of coronavirus fears.
The industry was already under-performing dude to abnormally mild winter conditions in Northern America this year, and coronavirus fears have exacerbated the issue.
"There is obviously some weakness which has been caused and compounded by a number of factors, including weather, supply additions and more recently the public health situation in China," Jack Fusco, CEO of Cheniere Energy Inc.
It is interesting to note that the U.S. gas market has been seen as a discrete entity functioning in isolation from global markets for a long time. However, the current price swings clearly exhibit a correlation between market anxieties abroad and the American gas market, illustrating the great extent to which globalization has made markets more interconnected.
The disease has also pulled down energy junk bonds; that is, the debt of already distressed companies that are of minimal value. Affected companies include Whiting Petroleum Corp
"Our current assessment forecasts that COVID-19 could result in global E&P investments falling by around $30 billion in 2020 -- a significant hit to the industry," said Rystad Energy's Audun Martinsen, head of oilfield service research.
Global markets have seen its worst dip since the 2008 crisis, with analysts expecting industry weaknesses to spill in to 2021. As a result, many oil companies are hesitating to drill out their core inventories and are waiting until they can do so at a profitable price.
"As the virus has caused reduced industrial activity and travel restrictions in China and beyond, much of this year's global expected oil-demand growth will be lost," Martinsen said. Oil prices also could decline without supply cuts by the Organization of the Petroleum Exporting Countries and allies. Lower oil prices will result in oil and gas companies scaling down their flexible investment budgets, especially shale operators in the U.S. as well as some offshore E&P players."
- https://www.wsj.com/articles/coronavirus-hits-once-isolated-u-s-natural-gas-market-11583145001
- https://www.marketwatch.com/story/energy-junk-bonds-tumble-as-coronavirus-fears-drag-oil-natural-gas-lower-2020-02-27
- https://www.naturalgasintel.com/articles/121185-oil-gas-operators-forecast-to-slash-ep-project-spending-on-coronavirus-impacts