Barclays is most exposed bank in Europe to US oil crisis
Barclays is the most exposed bank in Europe to the crisis
facing the US shale oil industry, Unearthed has found.
Bloomberg financial data analysed by Unearthed shows that
the British high street giant has been involved in active loans to big Texan
oil producers worth $63.1bn in total value, more than any other European bank.
Of this, an estimated $247.5m is still owed to Barclays, the highest amount
from such loans of any bank in Europe.
Unearthed’s analysis showed that European banks have been
involved in active loans to the Texan oil industry – one of the most
environmentally damaging industries on the planet – worth over $83bn.
Last month, US oil prices fell below zero for the first time
in history, exacerbating an already serious crisis among American oil
producers.
With much of the world in lockdown due to the coronavirus,
demand for fuel has plummeted. A price war between Saudi Arabia and Russia has
only made things worse for American oil firms.
The Colorado firm Whiting Petroleum declared bankruptcy last
month, followed a few weeks later by Diamond Offshore. The research company
Rystad Energy has predicted a further wave of bankruptcies in US oil if the
price remains low.
Brad Milsaps, managing director at investment analysts Piper
Sandler, told Unearthed that an oil firm going bankrupt would be the
“worst-case scenario” for any bank still owed money.
He added: “That’s the worry here. You may see a lot of guys
throw in the towel, just because prices are so depressed, and re-organise and
try to re-emerge out of bankruptcy.
“Banks are starting to increase their reserves for potential
losses against those loan books. The picture here is pretty grim barring a real
uptick in demand sooner rather than later.”
Barclays revealed last week that it has set aside £300m “to
reflect the probability of a sustained period of low oil”.
European exposure
Unearthed used the Bloomberg terminal, a tool for analysing
financial transactions, to collate active loans to the top 40 oil producers in
Texas where the top 10 European banks were involved.
These came to a total of $83.6bn, with $7.1bn outstanding.
Most of this is owed to American banks but Unearthed used the percentage of the
original loan provided by the top 10 European banks to estimate that they are
owed $873.6m. Barclays was involved in most of these loans and is itself owed
an estimated $247.5m.
This is an underestimate of the bank’s total exposure to the
crisis, as it doesn’t include smaller oil producers or other states, though
Texas produces 40% of the USA’s oil, far more than any other state.
Crédit Agricole, the second-biggest bank in France, is close
behind Barclays, with an estimated $207.2m outstanding from Texan oil
companies.
The other European banks with amounts outstanding are
Société Générale with $183m, HSBC with $125.8m, ING with $95.3m and Deutsche Bank
with $14.8m.
Oil company Occidental Petroleum owes the most to European
banks, an estimated total of $395.3m, of which $125.8m is owed to Barclays. It
has asked the US government to step in and provide financial aid, according to
a letter leaked to Bloomberg News.
At the same time, the firm has also appealed to the Texas
Railroad Commission not to put caps on how much oil it can extract from the
ground, even as the coronavirus crisis causes a collapse in demand for fuel.
Occidental has been forced to cut its dividend for the first
time in 30 years, reducing the payout by 86%. It was also named in an article
published on the website for the American stock exchange, Nasdaq, entitled “4
oil stocks that could go bankrupt in 2020”. Also included in that article was
Callon Petroleum, which owes Barclays an estimated $59.2m.
A spokesperson for Barclays declined to comment. Unearthed
has also contacted Occidental and Callon, but had received no response at time
of writing.
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