The oil price slump is hitting home with layoffs and spending cuts but there may be one positive development amid the rash of bad news: companies are tightening their belts more swiftly.
"The silver lining is the velocity--how fast all of these companies have moved to cut cost and build efficiencies. It's measured in weeks and months while in previous cycles it would take much longer," said Thomas McNulty, a director at consultancy Navigant Capital Advisors, .
This should enable companies with healthy balance sheets to stay in the green, he told CNBC's The Rundown.
Oilfield services giant Schlumberger (NYSE: SLB) was the latest casualty from the oil crash, posting its first quarterly loss in 12 years, prompting the company to cut another 10,000 jobs and initiate share buybacks, the company said on Thursday.
Oil prices have slumped 70 percent since they started their extended decline in the summer of 2014 with both U.S. WTI (New York Mercantile Exchange: @CL.1) light sweet crude and European Brent (Intercontinental Exchange Europe: @LCO.1) moving just below $30 a barrel in Asian hours on Friday after hitting 12-year lows recently.
The persistently low price is due to a supply surplus with the boom in shale oil contributing to the glut exacerbated by the refusal of producing group OPEC to cut its 30-million-barrel-a-day production ceiling. Saudi Arabia , the most influential member of OPEC is sticking to its strategy of low-cost production to squeeze out higher-cost producers elsewhere.
The strategy however is taking longer than Saudi expected, contributing to its record high deficit in 2015 and spurring the country to introduce austerity measures such as cutting energy subsidies.
"Some of the players in the Middle East may have the ability to produce at lower cost but they are also paying for everybody's education, they are paying for infrastructure, they are basically national companies and that allows a lot of the free market competitors in North American to find a way to make money at lower prices for longer and to compete. They are built to compete head to head every day and it's very different with the national oil companies," said Navigant's McNulty.
The rout is prompting a flurry of price downgrade with ratings agency Moody's (NYSE: MCO) the latest to cut its 2016 price estimates for crude-oil prices, to an average of $33 a barrel this year for both WTI and Brent, $7 lower than its forecast for WTI and $10 lower than its previous forecast for Brent.
"Today's large global inventories will still take time to unwind and will continue to drag on prices even as demand picks up," said Terry Marshall, a Moody's Senior Vice President