Wyoming oil producers are hoping for the best but realize global factors beyond their control could damage their industry, the spokesman for the Petroleum Association of Wyoming said Monday.
“With the lower demands due to concerns over COVID-19 [the novel coronavirus] and, of course, the announced flooding of oil supplies from Saudi Arabia over the weekend, it’s really created a perfect storm in global oil markets,” Ryan McConnaughey
“We’re confidant that if that if this can be resolved in short order that the companies can survive, but the reality is the break-even point, especially in the Powder River Basin, is about $59 a barrel,” McConnaughey said.
“If we continue to see $30-a-barrel prices, the economic viability for Wyoming oil will suffer,” he said.
Resulting lower gasoline prices will boost some sectors of the economy if people travel more, but that won’t overcome the overall impact on the state’s economy, McConnaughey said.
Every dollar reduction in the price of oil results in a $12.5 million annual loss to Wyoming, he said.
Oil prices have been bouncing between $30 and $35 a barrel, and McConnaughey said the last report he saw listed the price at $33. “Any of those in the long term will not be good for Wyoming producers, so we’re hoping we can get it in the upward direction.”
McConnaughey said he has not heard of layoffs or shutting down of operations, but he’s sure companies are monitoring the situation and will have to make decisions.
Monday, the combination of coronavirus fears and a collapse of an alliance between the Organization of the Petroleum Exporting Countries triggered a selloff at the New York Stock Exchange that triggered a trading circuit breaker that halted trading for 15 minutes.
The price of oil sank nearly 20% after Russia refused to roll back production in response to falling prices and Saudi Arabia signaled that it will ramp up its output.
But McConnaughey said OPEC will endure its own suffering if they continue flooding an already glutted oil market.
“The news has already reported that ARAMCO and the OPEC countries stand to lose about $500 million a day, and so that won’t be sustainable, either,” he said.