In mid-March, a conglomerate of oil producers announced sweeping production cuts of more than 10 million barrels per day (bpd), amid crashing oil prices and commodity markets which have been absolutely ravaged of late.
With prices of crude turning negative (mostly due to technical rollover futures markets), many investors in the oil patch continue to hope and pray for any sort of catalyst to take the sector higher or provide any sort of hope for the future.
One such potential catalyst, which investors have hoped for some time now, has been massive investment from the Federal government in the oil and gas sector. To date, the amount invested by the Trudeau government has been in the billions.
However, most pundits argue that a deca-billion-dollar investment would will be necessary to give the sector the proper amount of amperage in jolting these companies back to life.
The list of companies and sectors that require investment from government sources to stay alive in Canada is getting longer, so it seems questions about how much money may be available in total, for oil and gas will remain unanswered for the time being.
Even if more money were to flow into the sector, I don't believe a U-shaped recovery is likely at all, as I don't see a realistic scenario in which global commodity prices rebound for a few years, without a significant number of bankruptcies in the sector.
I would encourage all investors, including those waiting for a rebound in the oil and gas sector from a bailout, to consider the long-term headwinds facing the sector at the present time. These headwinds are likely to continue well into the future, irrespective of COVID-19.
Invest wisely, my friends.
