A staggering 3.4mn barrels of oil per day are being produced at a loss, a recent report by Wood Mackenzie has found.
With the price of Brent at $35 per barrel, high cost producers are struggling to break even but overall produciton levels have remained largely unaffected.
Since prices fell in late 2014, there have been few halts in production, with around 100,000 b/d shut-in globally to date, the report shows.
According to Wood Mackenzie, the areas with the largest volumes shut-in so far have been Canada onshore and oil sands, conventional US onshore projects and aging UK North Sea fields. Historically, these have been the areas with highest production costs.
However, Wood Mackenzie cautions that the number of shut-ins is unlikely to increase at the rate some might expect, as many producers hold out in the hope of a price rebound.
Stewart Williams, vice president of upstream research at Wood Mackenzie, said: “Our latest 2016 production data indicates that with Brent crude oil prices at US$35 per barrel ($/bbl), 3.4 million b/d of oil production is cash negative, which equates to 3.5% of global supply (96.1 million b/d).”
Wood Mackenzie’s study collates oil production data from over 10,000 fields and calculates the cash operating costs – identifying the price at which the fields turn cash negative, and the volume of oil production associated with this price level.
