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United States Oil (USO) , gas industry sheds more than 6,000 jobs in a single day

United States Oil (USO) , gas industry sheds more than 6,000 jobs in a single day

Oil and gas companies announced plans to cut more than 6,400 jobs on a grim day for the industry that saw the price of crude oil settle below $20 for the first time since 2001 and the amount of petroleum in U.S. storage rise by nearly 20 million barrels.

The most job losses came at Weatherford International, the Houston-based oil-field service company, which said Wednesday that it plans to cut 25 percent of its global workforce. A breakdown of where the layoffs will take place was not immediately available but the company had said it employed about 24,000 workers at the beginning of the year — meaning it will shed 6,000 jobs.

But as demand collapses during coronavirus-related shutdown orders and the recent global price war sent stockpiles soaring, Weatherford isn’t alone. Houston oil-field service companies Baker Hughes and Halliburton also said they were laying off almost a combined 400 employees at three locations in Oklahoma and Colorado this week.

Reid Morrison, an energy industry expert with the Houston office of the international consulting firm PwC, said the pandemic came at a moment of vulnerability for the industry. Crude oil in the U.S. spent almost a year near $55 per barrel, the price needed by many U.S. shale drillers to break even. Then a price war between Russia and Saudi Arabia sent the price tumbling below $30 in March.

With the industry still unable to resolve the global supply glut, West Texas Intermediate crude oil closed trading at $19.87 per barrel Wednesday.

“COVID-19 and oil price volatility have amped up the pressure facing the oil and gas industry, and there will be a time and place to reflect on lessons learned,” Morrison said. “For the immediate future and next 12 to 18 months, it is time for the industry to replace hoping for higher prices with resetting their strategies and cost structures based on the low cycle, which means shrinking.”

Baker Hughes on Wednesday attributed 234 layoffs in Oklahoma City to the combined effects of the coronavirus pandemic and the crash of crude oil prices, which have cut demand for the company’s services.

The company said Monday it would cut capital spending by more than 20 percent from 2019 levels and plans to write down the value of $15 billion of assets as part of its first-quarter earnings.

“Baker Hughes is responding as rapidly as possible to these conditions,” the company’s human resource chief Holly Page wrote in a letter announcing the layoffs. “In order to meet these rapidly changing unforeseeable business conditions, we are making the difficult business decision to reduce our staffing levels for some locations in the U.S.”

Halliburton laid off 33 employees in Pocasset, Okla., on Wednesday and other 130 employees in Fort Lupton, Colo., on Monday. The company has laid off an another 1,800 employees in Oklahoma, Colorado, New Mexico, North Dakota and Wyoming since October.

On top of placing 3,500 employees at its Houston headquarters on furloughs through May, Halliburton also cut salaries for executives and canceled an end-of-year contribution to employee retirement plans.

“This was a painful decision and I am fully aware of the difficulty this will cause our impacted employees,” Halliburton CEO Jeff Miller said in an email. “Unfortunately, this action is necessary as Halliburton adjusts to the market.”

Meanwhile, oil storage tanks in the United States are nearly 65 percent full because of falling demand for crude and its derivatives attributed to much of the globe remaining house-bound to prevent spread of the coronavirus.

After an increase of 19.2 million barrels last week, there are 503.6 million barrels of crude in commercial tanks across the U.S., 6 percent above the seasonal average, the Energy Information Administration said Wednesday. The U.S. has an estimated capacity of 768.8 million barrels at refineries and commercial tank farms.

U.S. demand is about 6.4 million barrels per day, 31.6 percent less than at the same time last year, the EIA said. Jet fuel demand is down by 39.7 percent and diesel demand is down by 8 percent, the agency said.

As result, U.S. refineries are processing an average of 12.7 million barrels of oil per day, 69 percent of their combined capability, according to EIA data.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 5.77.

The projected lower bound is: 2.85.

The projected closing price is: 4.31.

Candlesticks

During the past 10 bars, there have been 4 white candles and 5 black candles for a net of 1 black candles. During the past 50 bars, there have been 20 white candles and 29 black candles for a net of 9 black candles.

A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 13 falling windows in the last 50 candles–this makes the current falling window even more bearish. The two candles preceding the falling window were black, which makes this pattern even more bearish.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 10.5121. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 9 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 34.93. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 8 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -72. This is not a topping or bottoming area. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 11 period(s) ago.

Rex Takasugi – TD Profile

UNTD ST OIL FUND closed down -0.230 at 4.430. Volume was 260% above average (trending) and Bollinger Bands were 40% narrower than normal.

Open High Low Close Volume___
4.430 4.470 4.300 4.430 219,222,000
Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 5.03 7.66 10.79
Volatility: 161 143 80
Volume: 202,638,144 94,490,872 42,382,668

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

UNTD ST OIL FUND gapped down today (bearish) on heavy volume. Possibility of a Breakaway Gap which usually signifies the beginning of a major market move. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
UNTD ST OIL FUND is currently 59.0% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 63 periods.

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