Chart of the month

The sharp drop in oil prices has resulted in 4 million-5.5 million bbl of global daily production falling below cost for much of the past month.
 
This month’s chart shows the estimated amount of global oil production that is uneconomical under daily Brent crude prices, as determined by the International Energy Agency (IEA). Brent prices were taken from Nasdaq. The chart shows only the period of March 16-April 4, as the IEA did not provide estimates for pricing above $30/bbl. At the time of publication, the price of Brent was above $33/bbl.
 
Several factors contribute to production economics, including the technology required to develop a given resource type, the logistics of bringing production to market, operational efficiencies, and the financial health of the producer.
 
Saudi Arabia and Russia – whose recent spat over production cuts has resulted in plummeting oil prices – are expected to fare best of all the regions in this price environment. Both countries have relatively low production costs, as most of their oil output comes from conventional developments. The US and Canada are particularly hard-hit by the oil price war. With high-capital shale oil and oil sands production contributing to the majority of North American output, that region faces heavy pressure in the current price environment.
 
Water treatment technology providers and water services providers in the industry will feel the squeeze from tightened E&P budgets through 2020, as new projects are delayed and producers look to cut services costs. Last month, Kirk Presley, an energy equity research associate at Raymond James, told Water in Oil that his firm is predicting a 40% year-on-year reduction in US oilfield water management revenues in 2020.
 
For more insight into how low oil prices will affect hydrocarbons production in different resource types and regions, check out the updated oil & gas production and capex forecasts on Global Water Intelligence’s WaterData market analytics platform.