The energy sector is shrinking so dramatically that it's become the second-smallest group in the whole S&P index.
is cutting its capital spending globally by 30%. Exxon CEO Darren Woods expects oil demand to fall by between 25% and 30% in the immediate term. Chevron, BP, Shell and Saudi Aramco are among other major producers that have announced spending cuts of between 20% and 25% in their operations globally. As an industry, oil companies have so far slashed $54 billion in planned spending, Reuters reported this month.
"This year might be marked by the lowest project sanctioning activity since the 1950s in terms of total sanctioned investments, dropping to $110 billion, or less than one-quarter of the 2019 level, with most of the projects being deferred," Rystad wrote.Cash flow for oil companies is also set to nosedive, with the firm estimating free cash flow for the sector in 2020 to be reduced to $141 billion, or one-third of what it was in 2019.
Countries that rely heavily on the oil sector for government revenues, and on energy exports for U.S. dollars — including Russia, Iraq, Saudi Arabia and many other Middle Eastern and Central Asian countries — will come under intense pressure from the current plunges in oil revenue.
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