Executive Summary
The third quarter of 2020 experienced a relatively stable price environment compared to the volatile prices seen in the first half of the year. The WTI range narrowed, hovering around $40 per barrel, and natural gas increased from $1.70 per MMbtu to $2.50 per MMbtu. According to the Dallas Federal Survey released on September 23, industry participants expect oil prices to be nominally higher than last quarter’s expectations, but respondents continue to state that most new drilling remains uneconomic. The concurrent overlapping impact of (i) discord created by the OPEC / Russian rift and resulting supply surge; and (ii) the drop in demand due to COVID-19 related issues, was historic and continued to play a role in the third quarter. As optimism surrounding a gradual demand recovery has increased, companies are preparing for an eventful end to 2020. As if COVID-19 and the Russian-Saudi price rift wasn’t eventful enough, an election in November will add to the mix for what seems to be an already pressing and critical time for the industry. The unfortunate overlap in timing of these events has made the bankruptcy courts busy, with no indication of that trend coming to a halt. In this newsletter, we examine the macroeconomic factors that have affected the industry in the third quarter and peek behind the curtain on what the remainder of the year might hold.
