LOW OIL PRICES
Local industry and investment experts said Monday they expect continued struggles for the oil and gas industry following sub-$40-a-barrel prices and big drops in Wall Street stocks across the board.
Prices of sweet crude fell to their lowest in 6 1/2 years, dropping to around $38 a barrel on some exchanges.
The industry has struggled with a worldwide supply glut since October, but news of a slowing Chinese economy is worrying some investors about a drop in consumer commodity demand.
That could mean continued cutbacks for drillers and producers, experts say.
"It's going to be the strong survivors, the large recognizable names, that are going to be doing an awful lot of consolidating," said Gary Buchanan, founder of Billings-based Buchanan Capital Inc.
Buchanan called the slide a market correction that probably hasn't hit bottom. The Dow Jones Industrial Average fell 588 points Monday, about 3.5 percent.
The market decline was more bad news for oil and gas producers, who have been struggling for months.
In June, Montana state officials reported operating oil wells had dropped to zero in Montana for the first time in years. Rig counts in North Dakota, the center of the Bakken shale boom, were down 60 percent in June compared to the previous year.
Dave Galt, director of the Montana Petroleum Association, said domestic demand is not faltering, despite reports of a Chinese slowdown, but oversupply is forcing producers to hunker down.
"A depressed price under $40 is significant, and companies are having to cut costs and look at what they're doing," said Galt, who represents oil and gas companies throughout Montana.
At a Billings forum last week, Galt pushed for an end to the 40-year-old federal ban on oil exports, saying a lifting of the ban would open new markets and allow domestic producers to better compete with foreign oil companies.
For local investment firms, the drop in oil is a concern but not a cause to panic, said Larry Van Atta, Billings branch director for RBC Wealth Management, a Minneapolis brokerage.
"People are shying away to a certain degree, but they also know that oil isn't going to stay down forever," Van Atta said.
He added that most investors contacted him Monday about buying stocks of all kinds at cheap prices. The fall in the Dow was due, he said.
"We need to have a little correction in the market. I call it cleaning the debris out of the market. We need that, because things can't go straight up forever," Van Atta said.
Buchanan said he's advising clients not to panic because fundamentals of the economy remain strong. Home sales nationwide remain strong, and the labor market is steady, he said.
Nevertheless, the news from China is disturbing for U.S. markets, and oil won't recover overnight, Buchanan said.
"You can't be a Pollyanna about this. And I think we're going to have more volatility, with China and oil prices," he said.
Gas prices have not followed the drop in oil, rising 3 cents per gallon in the last week to an average of $2.87 Sunday in the Billings area, according to GasBuddy.com, a pricing website.
Analysts say the gasoline market has had little chance to react, and prices should drop considerably in the fall.
|September, 21, 11:00:00|
|September, 21, 10:55:00|
|September, 21, 10:45:00|
|September, 21, 10:40:00|
|September, 21, 10:35:00|
|September, 21, 10:30:00|
U.S. EIA - Energy companies’ free cash flow—the difference between cash from operations and capital expenditure—was $119 billion for the four quarters ending June 30, 2018, the largest four-quarter sum during 2013–18 Companies reduced debt for seven consecutive quarters, contributing to the lowest long-term debt-to-equity ratio since third-quarter 2014
OPEC - Total oil demand for 2018 is now estimated at 98.82 mb/d. In 2019, world oil demand growth is forecast to rise by 1.41 mb/d. Total world oil demand in 2019 is now projected to surpass 100 mb/d for the first time and reach 100.23 mb/d.
ARAB NEWS - Oil exports from southern Iraq are heading for a record high this month, two industry sources said, adding to signs that OPEC’s second-largest producer is following through on a deal to raise supply and local unrest is not affecting shipments.
PLATTS - The International Energy Agency expects the US to account for 75% of the global growth in natural gas exports over the next five years, a bullish outlook for LNG developers facing challenges at home getting projects off the ground and abroad with tariffs affecting trade flows.