Oil industry poised for more volatility as 26 US shale producers file for bankruptcy so far this year

CRUDE oil prices are poised for more volatility over the coming months as a total of 26 US shale firms have filed for bankruptcy since the beginning of the year indicating that their attempt to provide an alternative remains fraught with difficulties.


Over the last week, crude oil prices have been extremely volatile as the ongoing trade war between the US and China have led to them rising and falling intermittently. Brent Crude, a similar grade to Nigeria's Bonny light crude is currently trading at $57.62 a barrel, below the benchmark price of $60 a barrel upon which the Nigerian budget is predicated.


In a bid to rally prices, the Organisation of Petroleum exporting Countries (Opec) and Russia have been curbing production as increased US shale production has led to a supply glut. However, the US industry itself is facing a crisis as shale production costs are high and law firm Haynes & Boone, has revealed that bankruptcy filings by US energy producers so far this year have already nearly matched the total for the whole of 2018.


So far in 2019, a total of 26 firms with debts totalling $10.96bn have filed for court restructuring through mid-August, according to the law firm’s report. Last year, 28 companies filed for bankruptcy in the US, listing $13.2bn in debt, while 24 firms sought protection in 2017 with $8.5bn in debt.


Through most of 2019, US light, sweet crude oil has been stuck in the $50-range on the New York Mercantile Exchange, while last year West Texas Intermediate Crude averaged $65.06 a barrel. Crude prices also have fallen so low in some places that some companies have shut wells and others have paid pipeline operators to take their gas.


Buddy Clark, a Haynes & Boone partner, said, however, that he did not predict a new wave of producer bankruptcies similar to that which followed the oil price collapse in the middle of the decade. In 2015, there were 44 oil and gas producers filing for protection with combined debts of $17.4bn.


In the US oilfield services industry, there have been 10 bankruptcy filings so far this year, with Weatherford International by far the largest. It filed in July, listing unsecured debts of $7.4bn and the remaining nine firms combined have debts with a total value of $205m.