The entire oil industry is underwater

David Winans, credit analyst for PGIM Fixed Income's US investment grade credit research team, says the oil industry isn't just sinking, its completely 'underwater'…

At these prices, the entire industry is underwater. The focus is entirely on liquidity. How long can each of these companies hold their breath? Yesterday’s price move feels like oil is passing a kidney stone. A very painful move, but it cannot last for long, since producers are switching off wells as we speak. First quarter earnings hardly matter to oil/gas right now. The focus will likely be to what level companies can cut capital spending without seeing production go into a tailspin.

Liquidity and credit quality are paramount now, almost any dividend in the sector should be taken with a grain of salt. Most companies have cut already. Last cycle, the majors got a tailwind from refining and chemicals margins, and they cannot count on that this time. There may be some painful choices ahead depending on the length of this down cycle. 
The ‘supply shock’ from the OPEC+ collapse in March was really a mirage, the demand shock from COVID-19 is overwhelming everything. Ultimately, the path for oil prices is going to follow the path of this virus. Until demand shows some sign of life, oil prices will likely remain on life support.