This 3/31/20 article, though out of date because of very recent events, is worth reading. https://oilprice.com/Energy/Crude-Oil/H ... ly-Go.html (Author predicted a decline of frac spreads to 200 by end of April, but on 4/3 PV reported that frac spreads are already down to 215 (note comments re further drops coming fast) https://twitter.com/PrimaryVision/statu ... 5392965634.) Producers are racing to conserve cash, fearing bankruptcy if they can’t outlast the COVID-19-related demand destruction (reversal of which is not yet visible). https://oilprice.com/Energy/Energy-Gene ... dgets.html
On 4/3, BH reported US rig count dropped by 64 to 664, Canada by 13 to 41. https://oilprice.com/Energy/Energy-Gene ... Years.html. That trend will apparently continue, rapidly and dramatically.
Things are bad when producers have to pay someone to take their product. https://community.oilprice.com/topic/11 ... -in-first/
(see insightful discussion about crude market dynamics (electronic market, demand destruction effects, et al))
Demand has fallen off a cliff. Will markets look for visibility re when that will change? US producers face bankruptcy (Whiting just did) if they don’t cut capex to the bone (for some, even if they do), but there’s no clarity around how long it will take for demand to return.
KSA-Russia price war is relevant, but barely, in comparison. If price war ends and KSA/Russia again limit production (U.S. production should decline precipitously soon), that should have (already has had) a psychological effect (see dramatic change in spot prices over last two days). But how long will that last against a background of no visibility to reversal of demand destruction?
The most important variable now, imo, is how the war against COVID-19 is going. Visibility into winning that war, and consequent return of economic activity globally, will eventually put a light at the end of the demand destruction tunnel.
Is there money to be made in obliterated ngas? GS thinks it will be over $3 by ‘21, though BofA is not as enthusiastic. Good article: https://oilprice.com/Energy/Energy-Gene ... -Year.html