The global oil industry has gotten itself into a muddle: oil prices hitting an unprecedented negative territory with the situation aided by an oil glut, lack of storage, uncertain long-term demand, and a global pandemic that has suffocated demand.

A 9.7-million bpd production cut agreed to by Opec+ was thought to have been a relief, but its effect will not be felt anytime soon.

Industry leaders like Olivier Le Peuch, CEO of Schlumberger, say Q2 is likely to be the most uncertain and disruptive quarter that the industry has ever seen despite the agreement to cut production.

Other experts such as Elena Nadtotchi, Moody’s VP – Senior Credit Officer, see exceptionally weak short-term prices to persist until production drops enough to ease the strain on storage facilities already operating at or close to full capacity.

The International Energy Agency's (IEA) predictions aren’t positive either. Agency head Fatih Birol sees 2020 shaping up to be "the worst year in the history" of the oil and gas industry. IEA’s latest report said overall demand this year is expected to average 9.3 mbpd below 2019’s average of 100 mbpd. Global oil demand in April dropped by 29 mbpd.

Clearly, the whole situation has given rise to debates and discussions about the wider short and long-term challenges facing the oil and gas industry, since not only companies are affected but entire countries and populations.

Without a steady flow of petrodollars, governments of these nations could find that addressing the health emergency created by Covid-19 will be even more challenging. Consuming countries could see this as windfall but nations where petrol consumption is heavily taxed at the pump will see state coffers impacted.

But the negative pricing could be a symptom of bigger underlying issues that the industry must address. Arij van Berkel, Lux Research Director of Research, suggests the oil industry to diversify feedstock for downstream so that it can be more robust against price hikes.

Current market conditions have also forced oil companies to announce spending cuts after reporting revenue losses. Upstream spending is expected to fall 20 per cent this year, which means investments will shrink by $100 billion from 2019 levels.

Thousands of employees have been laid off and furloughed. It is estimated that more than 1 million oilfield service jobs will be lost during this crisis. That’s a 20 per cent reduction in industry staff.

Rystad Energy’s prognosis of the Covid-19 situation is that the pandemic will be a major factor for 6 to 22 months, and demand will return only after 18 to 24 months. That’s a long wait!