the Oil Industry amidst
the COVID-19 pandemic
On May 12th, we discussed the Oil Industry amidst
the COVID-19 pandemic.
Our customers, benefited from the expertise of Scotiabankers Rolf Schmitz, Stephen Bagnarol and Damian Jones as they shared global and local perspectives on navigating the current unchartered business environment. Insights were shared on how the COVID-19 pandemic has resulted in a fall in oil prices, subdued demand, and a price war between Russia and Saudi Arabia. The discussion focused not only on the recent volatility in the oil market, but also on the outlook for oil prices moving forward, the potential influence on the local energy industry and how this impacts the way business is conducted.
About the speakers
- Scotiabank is #1 in M&A Upstream transaction volumes between 2010 to date
- Coverage of the full value energy chain; i.e. Upstream, Midstream, Downstream and Oil Field Services
- Global commitments of over US$40BN of which US$6BN (15%) is within Latin America and Caribbean
- Scotia’s Corporate and Investment Banking Team does not only provide lending solutions but also covers commodity risk solutions in crude oil, distillate products, natural gas, power, emissions and resins
- Current oil prices are a function of 2 market events:
- Demand destruction as a result of effect Covid #19 with oil consumption down 12% in Q2. This remains a “pandemic” in the commodity market.
- Supply disruption due to disagreement between Russia and Saudi Arabia (short lived)
- Upstream producers have announced a 24% (~US$400BN) cut in their Capital Expenditure budget for 2020. However, countries such as Brazil and Guyana remain key markets for the majors
- Locally, BHP announced plans to continue its development of the Ruby field while Shell and BP have not announced intention to reduce current work programs through 2020-2021
- As expected, decline in industrial gas consumption has resulted in reduced gas prices
- The effect of Covid #19 has also been felt in the commodity markets with methanol at record lows
- Liquidity is the key for clients in all industries including energy to be well positioned to weather uncertainty
- Players with low cost structure and access to financing are well positioned to take advantage of potential opportunities (consolidation and acquisitions);
- Scotia’s Team is here to support with appropriate solutions including working capital support and leveraging our best in class digital solutions