2020 is surely not off to an excellent start for many reasons, with the most prominent being the ongoing coronavirus pandemic. However, if we ignore the epidemic for once and look past that, many things aren’t doing very well at the moment. In the energy sector, there is a threat of gas and oil bankruptcy imminent.
The crude oil prices of $50-60 per barrel in the Middle East
in a difficult year gave rise to some geopolitical tensions. Analysts suggested
that the energy sector needs a strong recovery to outgrow this mountain of
debt.
With the tensions between the US and Iran at the start of this year, the energy industry was concerned about the immediate consequences that it may have to face. Non-members of the Organization of Petroleum Exporting Countries (OPEC) were concerned about their renewal of production deals may get rejected, which would result in negative pressure on crude prices.
In March, when the coronavirus hit the market the hardest,
OPEC deals collapsed. Amidst the collapse, Russia and Saudi Arabia started a
price war in competition and offered the oil at low prices. What followed was a
plummet in crude prices due to nonexistent demand matched up against the
oversupply by the two countries.
In April, a renewed OPEC deal was signed which limited the
production and increased crude demand, which is a way towards a positive
outcome. However, it was already too late, and the damage was already done. The
second quarter of 2020 saw 18 bankruptcies emerging, which was the highest
since 2016.
Have a look at the following infographic to see the growing
wave of gas and oil bankruptcies in 2020.
Infographic by: visualcapitalist.com
