Oil News – 2/19/16

Some recent oil news:

Evidence linking oil and gas companies to seismic activity is growing. As if fracking wasn’t already in enough trouble with devastatingly low prices threatening US operations, the Sierra Club sued Chesapeake Energy Corp. unit, Devon Energy Production Co. and New Dominion LLC over the triggering of tremors in Oklahoma and Kansas. The environmental group said the practice of injecting liquid oil and gas waste into deep wells contributed to the more than 5,800 earthquakes in Oklahoma in 2015, compared to an annual high of 167 in the years from 1977 to 2009. With analysts already predicting a wave of bankruptcies in 2016, this lawsuit and the possibility of being linked to major ecological disturbances is the last thing oil and gas companies needed.

Adding to the 60 oil and gas companies bankruptcies filed over the last 16 months, Paragon Offshore, an offshore drilling rig company, filed for Chapter 11 bankruptcy. Devon Energy Corp. is also stumbling as it cuts dividends and jobs in a bid to save the shale driller’s balance sheet. Analysts expect as much as a third of the US oil and gas industry could be consolidated as a result of the downturn.

Looking now at OPEC, Iran and Iraq have refused to commit to capping oil production so desperately needed by Venezuela, Nigeria, and other weak oil-dependent members. Since Iran and Iraq were set to be the largest contributors of additional output refusal to cap their production hits OPEC’s power especially hard. Saudi-Iran tensions and a recent lifting of sanctions against Tehran had expectations for an agreement low. Iraq’s refusal to commit to curbing oil production is also unsurprising given the country’s need for revenue to fight ISIS. The news is bad for Venezuela. Almost completely dependent on oil and facing widespread shortages of necessities, the country is set to enter a vicious economic crisis.

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