Colorado oil and gas drillers could slow down some operations as quarantines and flight cancellations due to the coronavirus reduce global demand for oil, analysts warn.
The average price of oil in the U.S. hovered below on Thursday, its lowest point in a weeklong slide fueled by virus fears. Recent travel restrictions and lower energy demand, especially in China, have knocked about 600,000 barrels per day of oil demand out of the global market, said Bernadette Johnson, vice president of market intelligence with Enverus, an industry forecaster based in Denver.
鈥淓ven locally, our production of oil and gas is directly linked to the international market,鈥� Johnson said. 鈥淪o anything that happens with global demand will impact the producers here in Colorado.鈥�
The grim outlook comes as the United States confirmed its first coronavirus case not linked to foreign travel. So far, no Colorado residents have tested positive for the virus.
It also coincides with a tough few months for producers in the Denver-Julesburg basin. Oil prices had been hovering at a 2-year low even before the outbreak.
As a result, the have seen a declining number of both new permit requests for drilling at the state level and active rigs in the field, said Lynn Granger, executive director of the American Petroleum Institute鈥檚 Colorado chapter.
鈥淐olorado鈥檚 an interesting state to look in terms of the coronavirus because we have a lot of other factors at play here, both with our regulatory and political environment,鈥� Granger said. 鈥淚 think (the virus) is just one piece of that.鈥�
Even though tens of thousands of active wells continue to produce oil and gas in Colorado, several local governments have instituted moratoriums (or bans) on processing new well development as they rewrite regulations. Some communities, such as Boulder County, are looking to extend the pause on development well through 2020.
鈥淩ight now we鈥檙e very focused on coming to the table in our regulatory environment and hoping for regulations at the end of the day that are reasonable,鈥� Granger said.
Several companies have announced layoffs in recent months, including Denver-based Extraction Oil & Gas. The company eliminated about 20 percent of its statewide workforce in February.
While not directly attributed to the spread of the coronavirus and lower oil prices, the reduction was made to 鈥渂etter match (Extraction鈥檚) operational footprint here in Colorado,.鈥� according to spokesman Brian Cain.
Chris Wright, chief executive officer of Liberty Oilfield Services, a Denver-based hydraulic fracturing services company, said he hasn鈥檛 needed to lay off any workers despite lower oil prices in recent months. But Wright said the spread of the coronavirus has only increased the company鈥檚 need to cut costs and stay competitive in a difficult time for oil and gas.
鈥淚t鈥檚 another headwind on top of that,鈥� Wright said. 鈥淲e just don鈥檛 know how this is going to play out over the next few months.鈥�
