Oil giants cut jobs and projects as crude falls below $66

Oil producers are in panic mode. Chevron, BP, ConocoPhillips, Aramco, and Petronas have begun cutting jobs, canceling drilling projects, and disposing of assets as crude prices continue to fall.

The cuts began after Brent collapsed from its post-invasion highs and OPEC+ made the decision to increase production over a weekend, ignoring warnings of oversupply.

According to Financial Times, the world's major oil companies are acting faster than during the 2020 collapse. Tens of thousands of workers are being laid off.

The spending is frozen. Some projects have been archived, others are being completely abandoned to balance the accounts.

Chevron and BP cut jobs as crude prices collapse

Chevron and BP have already laid off thousands of workers. At the same time, both companies are racing to find tens of billions of additional savings. Spending plans are being cut.

Ongoing projects are being paused or put up for sale. ConocoPhillips followed suit last week, cutting more staff as U.S. shale producers struggle to survive under lower prices.

The U.S. shale sector is the most affected. Every high-cost operation is losing money. Brent crude is trading below $66 per barrel, and companies cannot cover costs, let alone pay dividends and buy back shares. BP has already reduced its buybacks. Morgan Stanley said in a note that more oil giants will follow this path.

Not even state-owned companies are immune. Saudi Aramco has just sold a stake of $10 billion in its pipeline network to raise cash. Malaysia's Petronas has cut 5,000 jobs. Basically, no one is safe, regardless of their size. Everyone is trying to stay afloat, not expand.

Crude oil prices have fallen nearly 50% from their peak following the Russian invasion of Ukraine. But instead of cutting back, OPEC+ decided to pump even more oil into the market. That decision, made over the weekend, will add further pressure to prices.

The cartel, which had previously been cutting production to protect prices, has now changed its strategy. For five consecutive months, they have focused on regaining market share, even if that means choking the U.S. shale sector with cheap barrels.

Russia breaches quota while OPEC+ increases production

Russia did not reach its production quota for August under the OPEC+ agreement. The country pumped 9.175 million barrels per day, a figure higher than in July but still about 84,000 barrels below its target. The quota included previously agreed compensatory cuts to offset prior overproduction.

Russia has a history of lagging behind in these agreements. It agreed to reduce supply after exceeding its limits, but deadlines and cuts keep changing. Officials say this is due to seasonal conditions and the geological structure of Russian fields.

But regardless of the excuses, the country's production still fails to keep up.

Unlike Russia, Saudi Arabia maintains more than 2 million barrels per day of inactive capacity and can increase supply almost instantly. Even after fulfilling its commitment to OPEC+, it still has plenty of room. Russia, on the other hand, cannot increase production quickly enough to benefit from the additional quota space it received.

OPEC+ promised an increase of 1.66 million barrels per day. But adjusting for compensatory cuts and capacity limits, only about 1.15 million will materialize. This means the group is overselling its actual supply gains. Still, it's enough to tilt the market further toward oversupply.

The alliance maintains more than 3 million barrels per day of available capacity. Most of it is in Saudi Arabia, the United Arab Emirates, and Iraq. They are the ones who can open or close the taps whenever they want. Everyone else, especially Russia, is just trying to catch up.