For a few weeks, oil prices climbed and stabilised, and it looked like the worst of the oil crash was finally ebbing away.
After reaching the lows of the year mid-March, West Texas Intermediate crude oil gained about 50%, steadily climbing, first back to $US60 a barrel.
But by the first week of July, oil had started to slide again until it finally crashed into a bear market — defined as 20% decline from recent highs.
And now, energy companies are saying the same things we heard months ago.
In a story on Sunday, the Wall Street Journal’s Lynn Cook reports that with oil prices hitting new lows, US energy companies are planning to cut more jobs and sell more assets — the same tactics they employed to cope with the first wave of the crash.
According to the Journal, drilling giants Halliburton and Baker Hughes have now cut more than twice the number of jobs they disclosed in February — about 27,000 in total.
And as we noted last week, Baker Hughes warned in its earnings release that it expects tough market conditions to continue “across all segments” for the rest of 2015. The company also did not forecast a rebound in oil prices.
Halliburton CEO Dave Lesar said the company will continue to “manage costs through the downturn” so that the company will be well positioned for growth “when the industry recovers,” a moment that now appears to have been pushed back as energy companies, and energy markets, are now fastening their seatbelts again.
In a note to clients on Monday, Deutsche Bank’s Jim Reid also noted that the oil crash seems to be playing out the same way it did late last year(emphasis and link added):
“It looks like we are starting to see signs of similar Oil-related headlines to the ones which dominated markets seven to eight months ago. The FT is running with a story suggesting that the world’s biggest energy companies have delayed $US200bn worth of spending on new projects following the latest selloff. Meanwhile the WSJ is suggesting that US energy companies are planning more layoffs with ConocoPhillips in particular looking to potentially cut headcount by ‘thousands’ in addition to the 1500 jobs cut so far.”
And in the coming weeks, results from the energy sector are expected to be ugly, with earnings estimated to decline 54.4% year-over-year — the largest ever. Excluding energy, the S&P 500 would post a 4.1% gain in earnings instead of the 2.2% drop currently estimated, according to FactSet’s John Butters.
This week, Exxon Mobil and Chevron report their earnings results, and could provide more colour on what the industry expects now that oil prices are heading for the year-to-date lows again.
On Monday morning, WTI fell more than 1% to as low as $US47.23, the weakest level in four months.
Here’s a look at WTI over the past 12 months:
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