HOUSTON – (Realty News Report) – West Texas Intermediate crude dropped below $1 a barrel Monday morning, the lowest price on record.
Monday’s unprecedented price decline places increased pressure on energy firms in Houston, which is known as The Energy Capital of the World.
A vast oversupply of oil comes as travel has ground to a near-halt as the Coronavirus and stay-at-home quarantines have been used across the world to fight the spread of Covid-19.
At the beginning of the year, WTI was priced at $61 a barrel. Permian Basin drillers need the price to be around $50 a barrel to break even.
Oilfield service companies Halliburton, Baker Hughes, Weatherford have slashed thousands of jobs and Schlumberger just reported a $7.4 billion first quarter loss. These companies have a significant presence in Houston. On Friday oil closed at $18.12 a barrel.
Houston’s office market, which has a vacancy rate of 20 percent, will be impacted as energy firms layoffs employees and falter.
Many owners of Houston office buildings are “bracing themselves for layoffs, bankruptcies and downsizings primarily in the energy sector that could translate into lower rents, higher vacancies and foreclosures,” the Madison Marquette firm said in a first quarter report.
Residential markets are soft, due to Covid-19. Mortgage rates are below 4 percent, but millions of people are losing their jobs and millions more are worried about losing their job security. But mortgages, although affordable, have just become harder to get. Chase Bank, for example, is tightening its lending standards, requiring 20 percent down and credit scores of 700.
By mid-April, pending home sales had dropped significantly and a decline of more than 25 percent is expected in April.