• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 12 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 5 days Does Toyota Know Something That We Don’t?
  • 5 days World could get rid of Putin and Russia but nobody is bold enough
  • 22 hours America should go after China but it should be done in a wise way.
  • 7 days China is using Chinese Names of Cities on their Border with Russia.
  • 8 days Russian Officials Voice Concerns About Chinese-Funded Rail Line
  • 8 days OPINION: Putin’s Genocidal Myth A scholarly treatise on the thousands of years of Ukrainian history. RCW
  • 8 days CHINA Economy IMPLODING - Fastest Price Fall in 14 Years & Stock Market Crashes to 5 Year Low
  • 7 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 8 days Putin and Xi Bet on the Global South
  • 8 days "(Another) Putin Critic 'Falls' Out Of Window, Dies"
  • 9 days United States LNG Exports Reach Third Place
  • 9 days Biden's $2 trillion Plan for Insfrastructure and Jobs

Analysts Say Oil Industry Needs $45 Oil Price To Break Even

Technological advances and deflationary pressure from the downturn have resulted in an 8-percent drop in global average unit production cost to US$30 per barrel of oil equivalent in 2016, which implies that the industry needs the price of oil at US$45 to break even in aggregate, according to a Bernstein Research survey of the 50 biggest listed global oil and gas companies.

Global marginal cost, that is, the cost to replace reserves, for non-OPEC oil producers dropped by 12 percent annually to US$63 per barrel in 2016, according to the survey, as carried by Oil and Gas Investor. The marginal cost now equals the breakeven point from 2006 and is down a massive 40 percent since the peak from 2013, Bernstein analysts, led by Neil Beveridge, say.

The global marginal cash cost of production—representing the floor under oil prices below which it is not profitable to produce a barrel, dropped by 8 percent to US$28 per barrel last year.

The reduced costs for production were mostly driven by a 29 percent annual drop in exploration costs, an 11 percent decrease in production costs, and a 14 percent decline in Selling, General and Administrative (SGA) costs, according to the survey.

The North American shale patch producers were the champions in cost reductions, while national oil companies (NOCs) saw costs grow as “resource complexity and depletion continues to push up production and development costs,” Oil and Gas Investor quoted Bernstein analysts as saying.

Related: Unstoppable: U.S. Adds Oil, Gas Rigs As OPEC Extends Deal

With the higher oil prices this year compared to last year, cost cutting is expected to bottom out and in some places—increase.

We suspect we’re getting close to the bottom of the range in what’s possible, although there is certainly no indication of a return to rampant inflation, either,” according to Bernstein.

In the shale patch, for example, oilfield services costs are expected to increase, potentially slowing down the drop in breakeven costs.

By Tsvetana Paraskova for Oilprice.com

ADVERTISEMENT

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage



Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News