Impact of COVID-19 on the Global Pressure Pumping Market
Oil price volatility has always been a challenging element in the oil & gas industry. Oil prices have been declining in the last three to four years. However, the recent COVID-19 pandemic has disrupted oil demand and has had a severe impact on financial markets. The COVID-19 outbreak has affected a wide range of industries, including energy & power, automotive, and chemical. However, due to the lockdowns across various countries, people and goods are not moving around, resulting in a heavy blow to the demand for transport fuels. China is one of the largest importers of oil but has shown a steep fall in demand, which is a significant implication for the global oil & gas market.
The Organization of the Petroleum Exporting Committee (OPEC) issued guidelines for oil producers to cut oil production by 1.5 million barrels. This guideline had to be followed by other countries as well. However, few countries continued to produce oil at the same level, resulting in a steady production level compared to a fall in oil requirements, which resulted in a huge demand-supply gap in the industry due to the global lockdown. The COVID-19 crisis has caused a sharp fall in oil prices, reaching negative. The sudden cut in oil production has posed strategic challenges that must be faced by leading oil & gas companies.
Crude Oil Production in the US (2012–2021)The pressure pumping market has also been affected due to reduced upstream activities. The operations of oil & gas exploration companies could be reduced only to a certain extent. However, if the production stops further, the oil wells would be sealed, which might risk the loss of the asset permanently, leading to huge losses and lower than zero dividends by the oil companies to the pension funds, especially in North America and Europe. On 15th May 2020, the Energy Information Administration (EIA) announced its forecast of crude oil production fall in the year 2020 and 2021 due to the falling demand for petroleum products because of the COVID-19 pandemic. EIA forecasted that the production of crude oil in the US would average out at 11.7 million barrels/day in 2020 and 10.9 million barrels/day in 2021 and that it would be lower than the average of 12.2 million barrels per day in 2019.
Source: US Energy Information Administration and Short-Term Energy Outlook (STEO)
Source: Primary Experts, Secondary Sources and MRFR Analysis