Earlier this month Halliburton (HAL) announced it was laying off more than 800 employees amid a slump in the oil patch:

Halliburton is laying off more than 800 employees in El Reno, Oklahoma, and says it expects to close its office in the Oklahoma City suburb.The move by the Houston-based company is expected to have limited impact, if any, in Texas. Companies are required to file advance notice for large layoffs in Texas, and none has been filed by Halliburton in recent months.Oklahoma Office of Workforce Development spokesman David Crow says the agency was notified of the layoffs and apparent closure of the office, effective Monday.

Oil markets are cyclical in nature. Over the past few years oil prices may have become divorced from economic forces. They may have been more sensitive to OPEC supply cuts than actual demand for oil. Brent oil is now around $64. OPEC and Russia recently agreed on deeper supply cuts, which could prop up prices further. The question remains, “Will demand be enough to spur E&P in the oil patch?”

Industrial production fell 0.8% for the month of October, the largest decline in 17 months. Factories may be reticent to expand production unless consumer demand warrants it. The trade war with China has hurt global trade in general. It has also created uncertainty about the economy. Waning industrial production and manufacturing activity will likely hamper demand for oil. Oil companies appear to be responding by cutting drilling activity.



Please enter your comment!
Please enter your name here