Shale, deep-water oil making US oil industry more competitive
The costs of producing shale and deep-water oil have fallen in recent years, enabling the U.S. oil industry to be more competitive with the Organization of the Petroleum Exporting Countries (OPEC), according to the Institute for Energy Research (IER).
Shale oil production has become profitable at below $40 a barrel. By early next year, the cost of deep-water oil production is expected to fall to between $40 and $50 per barrel. In the first quarter of this year, the average break-even price was approximately $62, and, in 2014, it was $75.
OPEC anticipates keeping oil prices between $50 and $60 a barrel by extending its production cuts for another nine months, which will keep approximately two percent of global oil production off the market.
As of March 17, U.S. oil production in the U.S. Gulf of Mexico had reached a record of 1.76 million barrels a day, which is 33 percent higher than production in March 2014. According to Citigroup, deep-water output could expand by more than one million barrels per day by 2022.
Reducing costs and improving productivity have allowed companies working in shale oil basins to, in the best fields, break even at approximately $30.
According to IER, many analysts project that U.S. oil production will reach 10 million barrels per day next year.
