US Oil Market to See Consolidations Within Two Years Due to Low Cost

WASHINGTON (Sputnik) — The US oil market will see consolidations, slowdown as well as possible bankruptcies over the next two years due to low oil prices, former US Assistant Secretary of Energy Chuck McConnell told Sputnik.

"We are already seeing in terms of jobs that have been lost, investments that have been slowed or even stopped <…> Very likely there will be consolidations, there may even be some bankruptcies," McConnell said.

Top US shale oil producers have reportedly announced their intention to cut production. Devon Energy and Marathon Oil Corp. intends to reduce production by 10 percent in 2016 compared to 2015, while EOG Resources Inc. plans to cut output by 5 percent, The Wall Street Journal reported on Tuesday. On Monday, the US Energy Information Administration (EIA) revealed data showing production levels in the United States falling from 9.377 million barrels per day in November to 9.262 million barrels per day in December.

"So, I think consolidation and a slowdown likely to be in our future for the next year or two," McConnell said, adding that the current consolidation of the US oil industry would make it healthier over time.

Companies will focus on cost reduction and technology improvement, according to McConnell. He stressed that market leaders would drive the process, while less competitive companies would not survive.

Global oil prices plunged from $115 to less than $30 per barrel between June 2014 and January 2016, hitting their lowest levels since 2003 amid an ongoing glut in global oil supply.