US net oil producers, refiners and pipelines are competing for cash and are likely facing restructuring because they are struggling under the burden of heavy debt and shocks in both supply and demand in the worst crisis the oil industry has faced.
Fuel demand has decreased by nearly 30% worldwide due to the coronavirus pandemic, and just as the health crisis worsened, the price war between Russia and Saudi Arabia led to markets being flooded with crude. The industry was already struggling to pacify investors dissatisfied with weak returns, even as the United States rose to become the world's largest oil producer in the past few years.
This dangerous stance was prior to US prices crashing deep into negative territory at-$38 dollars a barrel on Monday. These shocking declines came despite significant spending and production cuts that had already been announced by US producers, and reflected a price environment that was much lower than levels set by firms and advisors using worst case scenarios.
According to energy lawyers, Haynes and Boone, almost half of the 60 independent American oil producers will likely need to review options to obtain additional liquidity.