Prolonged low crude prices are threatening the cautious optimism heard earlier this year.
June marked a full year since oil prices began their decline. During the second quarter of 2015, prices stayed between $45 and $60, a great deal lower than the more than $90 a barrel for the same period last year.
The WSJ reports that “Though prices are widely expected to rebound over the coming years, and oil companies tend to take a long-term view rather than focus on day-to-day changes in the market, the current weak prices illustrates the risk that the market could remain under pressure for longer than anticipated, driving prolonged pain and the need for more stringent action.”
As second quarter earning results are trickling, many companies are showing signs that they are shifting their priorities from growth to survival.
Shell: Q2 profits fell sharply, resulting in cuts to company’s capital investment and an elimination 6,500 jobs.
Chevron: Company announced its upstream businesses were particularly hard hit and they will lay off roughly 2 percent of its global workforce.
ExxonMobil: Q2 profits fell 52% and company announced it is taking steps to mitigate the harsh climate for oil and gas majors. Capital expenditures were cut 16% last quarter.
BP: Revenue and profits were all lower than expected and company announced it is positioning itself for a period of weaker prices.
One analyst believes that the a shakeout. David Tameron, of Wells Fargo Securities told WSJ that “too many energy companies, particularly in the bottom tier, have been able to hang on through the downturn with the help of financial backers. You need some producers to go away.”