When pumping oil stops making sense
Consulting firm Wood Mackenzie has tried to put some numbers around how much global production no longer makes economic sense now.
What they found: Their analysis explores the economics of currently producing assets worldwide.
- When Brent crude prices fall to $35-per-barrel, revenue from about 4 million barrels per day of output doesn't cover costs and governments' share.
- When they drop to $25, it means about 10 million barrels per day, or about 10% of global production, falls below that threshold.
- Prices are now in the $26 per barrel range.
Why it matters: "If prices do not rebound quickly, we’ll see a significant impact on currently producing fields and future supply," they note.
The big picture: Regardless of the exact price movements, there are lots of uncertainties ahead, which means...
- "Large new projects will be put on hold and short-cycle discretionary investment will be dialed back to the bare minimum. Spend on projects under development and onstream will also be targeted."