(July 31, 2020)
Just a few months ago, the outlook was grim for oil companies as prices collapsed into negative territory. But with the oil price back above $30 per barrel and the number of drilling permits in the Permian Basin on the rise, some observers believe the industry could be about to bounce back.
The historic plunge in oil prices to $-38 per barrel in late April was driven by the collapse in demand triggered by the coronavirus pandemic. The health crisis erupted amid a global oil price war involving Saudi Arabia and Russia that led to an oversupply of oil, making the price crash all the more dramatic when demand dried up. Although the virus is still spreading rapidly across the country, a combination of production cuts by oil companies and a limited rebound in demand from reopened businesses is encouraging some observers to adopt a more optimistic outlook for the coming months.
One of the first hopeful signs came in early June, when 109 permits to begin drilling wells were filed with the Texas Railroad Commission during the week of June 3 to 9. This was more than double the number of the previous week. On top of this, oil prices saw a slow but steady gain during May and June, approaching $40 per barrel late last month.