Were These U.S. Facts Reported of China, Wall Street Journal Would Hyperventilate ‘Crash’
Feb. 22, 2016 (EIRNS)—Putting a point on the collapsing condition of Barack Obama’s "new Saudi Arabia of oil and gas," the Dallas Morning News on Feb. 18 cited an industry analyst,
"There are now virtually no wells in the United States profitable to drill. That has forced some companies into a fatal spiral, producing oil simply to satiate their lenders. Others are getting desperate."
Standard and Poor’s now estimates that 150 more U.S. oil companies will go bankrupt this year, and one-third of the rest will disappear by absorption. They are often now selling themselves to their lenders for debt, a partial liquidation. The International Energy Agency estimated today that U.S. oil production will drop by another 8-900,000 barrels, or 10%, in 2016; 250,000 jobs have been lost.
An estimate by Goldman Sachs Feb. 19, is that 40% of the $2.5 trillion in energy debt held by U.S. banks and funds is now junk debt.
The Institute for Supply Management index of U.S. manufacturing, published Feb. 22, was in contraction below 48.5 for the fourth consecutive month (50.0 is breakeven). Capital investment was down 6% in 2015 from 2014; U.S. corporate profits fell 4% in the fourth quarter of 2015, and are falling at the rate of 7% in the first quarter of 2016. Withholding taxes paid on wages fell by 0.2% in January after falling by 0.1% in December.
As for Wall Street, a long analysis note by the chief energy analyst of Bank of America comments, "Banks are now out to save themselves," and are calling in all the loans and cutting all the credits they can. The note was published by ZeroHedge, and it also makes clear that there was, in fact, a meeting in Houston between banks and regulators in which the banks were told not to mark energy debt down to market value, but to try to liquidate debtors where possible instead. The meeting was held, not by the Dallas Federal Reserve, but the Office of the Controller of the Currency, allowing the Dallas Fed to deny it when exposed.
This collapse in the American oil industry is one reason that President Putin’s Russia-Saudi oil production limiting agreement may slowly be succeeding in reversing the oil price collapse, despite all odds.