Arrow Exploration Announces First Quarter 2020 Financial and Operating Results and Provides Updates - EnerCom Inc.

Arrow Exploration Announces First Quarter 2020 Financial and Operating Results and Provides Updates - EnerCom Inc.


Arrow Exploration Announces First Quarter 2020 Financial and Operating Results and Provides Updates - EnerCom Inc.

Posted: 14 Jul 2020 12:35 AM PDT

Oil Prices Turn Negative Amid Declining Economic Activity - Forbes

Posted: 21 Apr 2020 12:00 AM PDT

It's been 100 years since the Spanish Flu ravaged the global community. Today it's COVID-19, the worst flu pandemic since. In 1918, governments around the world consciously suppressed information to keep WWI soldiers from becoming fearful. In this, the information age, it's a very different story. Rather than suppress information, governments, medical experts, and private industry representatives are rife with data on this dreaded disease. To make matters worse, some of the information we receive is contradictory, plus the political spin is alive and well. This leaves many unsure of what to believe. For example, how will we know when it's time to reopen the economy? And, how safe is it to venture out in public? While there are many unanswered questions, here's what we do know: shutting down large segments of the economy will have a dire effect on the lives of hundreds of millions. It's ironic, but the remedy prescribed to fight the spread of COVID-19 may in fact, be worse than the virus itself. Many experts believe the economic hit will be especially harsh as GDP in the second quarter is expected to decline between 24% and 50%.

The Disappearance of Demand

The demand for goods and services has dropped sharply. According to one source, sales of general merchandise declined 26% for the week ending April 4. Moreover, U.S. restaurant transactions fell by 43% around the same period. Despite this, online sales grew by 16% compared to pre-crisis levels. Even though there are a few bright spots, the net effect is still economic disaster. Here's an excerpt from a Forbes.com article I wrote on COVID-19, February 24, 2020:

A prolonged scenario would hurt many industries including travel and tourism, the food industry, the entertainment industry, and basically any business where large groups of people gather. With fewer people venturing out, traditional retailers (i.e. brick & mortar) would continue to suffer, leading to a spike in online sales as more people choose to have it delivered. Why venture out if you don't have to?

At the time, I imagined an old west ghost town, complete with tumble weeds meandering down main street. I realize that is a hyperbole, but I am shocked over how much life has changed for so many.

Oil Prices Plummet: Here's Why

One of the hardest hit industries is the energy sector. The lack of travel has pushed the price of oil to an all-time low. Yesterday, the price of WTI crude fell into negative territory, temporarily reaching negative $40. This implies that the seller of oil would have to pay the buyer to take possession of the commodity. Is this true? Not exactly. At least, not yet.

The spot price of oil (i.e. it's current price) is based on the value of the closest futures contract. Yesterday (Monday, April 20), one day before the May '20 contract would expire, its value went negative. Why? Because demand has fallen, supply remains elevated, and storage capacity is becoming a concern. Sure, Russia and Saudi Arabia reached an agreement to cut daily production, but the amount is insignificant. It's estimated that storage capacity is at 70%. Therefore, if crude oil production continues as is and demand remains suppressed, we will exhaust our ability to store the commodity. If this materializes, sellers of crude may indeed have to pay buyers. It should be noted that crude oil consumption had been steadily declining over previous decades as technological advances have led to greater fuel efficiency.

Clearly our political leaders recognize the potential for a "Great Depression-Part Duex" event as a result of the closures. Even with the drop in oil prices (along with gasoline), many consumers are hesitant to venture out. Therefore, when we receive the "all clear" notice, it's unlikely that economic activity will return to pre-crisis levels any time soon.

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