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Rating agancy S&P on Tuesday puts the majority major oil companies on negative ratings watch or lowered their outlook. Many of the energy sector has massive debt exposure which has exposed them to the lockdown economic collapse and to add salt we are seeing aggressive energy transition by the developed world.

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There has been a huge vaccum in the world with so many out of work and politically empowered movements from the 'spare time'. Tomorrow New US President Biden will announce #oil & gas drilling bans for Federal land Wednesday January 27 among executive orders detailing #climatechange policies via NY Times citing "2 people familiar with his plans".

Last week on Inauguration Day halted the Interior Department and other agencies’ authority to issue drilling leases or permits for 60 days while they reviewed the legal and policy implications of the current federal minerals leasing program. He 'Will direct federal agencies to determine how expansive a ban on new oil and gas leasing on federal land should be, part of a suite of executive orders that will effectively launch his agenda to combat climate change,"

An eventual ban on new drilling leases would fulfill a campaign promise that infuriated the oil industry and became a central theme in the fight for the critical battleground state of Pennsylvania" With this political shift access to capital at cheap rates is slowly being closed off. To be fair at this time even junk bonds have historic low rates. Rating agencies like to fall in line with the prevailing governemnt for all the obvious reasons, though they will deny that of course. Inependance and all. Whatever the reason it is clear oil companies need to cut debt.

The kicker is that that nost oil companies won;t be investing in new production unless oil rises above $75 for a sustained period and/or poitics sees reason. , or maybe even $100. The transition away from fossil fuels is a long way off in reality and that spare OPEC capacity isn't even close to filling in the gap. The result will be a spike in oil prices in two years or less.

List of majors who are on watch negative or had their outlook lowered:

  • Royal Dutch Shell
  • Total
  • Standard Oil
  • BP
  • Imperial Oil
  • Exxon
  • Conocophillips
  • Chevron
  • Suncor
  • Noble

Source: S&P

From The TradingCommunity News Desk

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