Oil Market Blood Bath Has A Long Way To Go

Another Wednesday, another big build in domestic crude stocks, sending oil prices swooning again. Prices retreated another 3% to under $45 a barrel. Two majors, Hess and Royal Dutch Shell, reported some pretty bad numbers, proving that it’s not only the small independents that are in deep trouble here. The majors are hardly immune.

Royal Dutch is cutting $15b of capex over the next 3 years and freezing dividends, following Conoco-Phillips (COP), first to the capex machete, dropping $2b off their spend in 2015 alone.

And don’t get me started on Hess. Here’s one where the Paul Singer magic hasn’t worked out. The hedge fund genius is an activist holder in the old Jersey based company and had a hand in pushing for the many divestitures that Hess has made over the last two years, including the entirety of their refining and gas stations and Hetco trading company. Those cuts, in order to concentrate on oil production and particularly Bakken oil production, are starting to make diversification look like a whole lot better oil strategy than it did a year ago. Defiantly, Hess has ramped up production in the 4th quarter anyway and is planning on making some serious stock buybacks. Clearly, the company is betting on a very quick rebound in oil prices.

There is a group hallucination going on, as it seems that everyone else is banking on one too – or praying for it.

With the increasing stockpiles as proof, slashing spends and cratering…