New Mexico’s oil and natural gas economy is collapsing, as the global coronavirus pandemic continues pushing energy prices to record lows.
New Mexico Rig Count Lowest in a Year
At the beginning of April, 100 active rigs were operating on the New Mexico side of the Permian Basin. But with drillers shutting 30 down in just the past week, the state’s total rig count has fallen to 70 – the lowest in a year.
“We’re seeing massive layoffs in our industry because of the low price, bankruptcies, and lots of shut-in production,” Kathleen Sgamma, president of the Western Energy Alliance, recently told the Carlsbad Current Argus. “I’m not sure how this all ends, as many companies are struggling just to survive. New development is of course being curtailed, but existing production is also being shut in.”
Texas drillers are struggling as well, with the Lone Star State’s rig count falling from 338 on April 3rd to 231 on April 24th.
Coronavirus Travel Restrictions Force Oil Production Cuts
The novel coronavirus has so far sickened more than 3 million people around the world, tragically killing over 212,000. Nearly 1 million infections have been confirmed in the United States, where the death toll now exceeds 56,000.
With the citizens of nearly 200 countries currenty subject to various stay-at-home or shelter-in-place orders, demand for oil and natural gas has all but evaporated. According to a report from Rystad Energy, global oil demand was expected to increase by 100.5 million bpd this year. But because of widespread travel restrictions intended to limit the spread of coronavirus, it’s likey demand will instead drop by 10 million barrels.
“As global travel restrictions will largely stay in place in May 2020, gasoline demand will remain significantly depressed,” said Rystad’s Senior Oil Market Analyst Artyom Tchen. “Everyone along the supply chain is getting hammered right now, but refiners and traders exposed to gasoline are suffering the most.
New Mexico Stay-at-Home Order Extended Until May 15th
Not long ago, Permian Basin drilling was the engine driving the New Mexico and Texas economies. But with the emergence of COVID-19, each has seen thousands of oilfield workers laid off or furloughed in recent weeks. Now the financial fallout from the oil market collapse is increasing calls for both states to reopen, despite coronavirus outbreaks that are far from contained.
Texas Governor Gregg Abbott has been receptive and intends to allow his state’s stay-at-home order to expire on April 30th. New Mexico, however, has extended a similar order until May 15th.
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