Crude Oil Price Drop Could Hurt Supply
Low crude prices are putting pressure on U.S. oil producers, potentially impacting future supply
Key Observations
- Crude oil prices have dropped into bear territory for U.S. producers. The latest West Texas Intermediate crude price of $61.50 per barrel is close to the break even cost for new wells in the Texas oilfields.
- Crude prices are still above the cost to produce from existing wells. Most Texas producers can still make money at $50/barrel prices.
- But a sustained period of low crude prices will discourage new well drilling. Oil supply could be impacted long-term and prices could rise as a result.
- The sweet spot for WTI price is around $65/barrel. High enough to keep new well drillers active, but low enough to keep diesel prices down.
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