At US$88, Brent drops by 23% from the year's peak above US$115 in June

14-Oct-14

Brent oil stands at around US$88 per barrel, down more than 23% from the year's peak above US$115 in June, raising concern that some shale oil projects will become un-economic. However Maria van der Hoeven, executive director of the International Energy Agency said that only a tiny minority of shale oil production would be affected by the slump in prices to near-four-year lows. The vast majority of shale oil in the United States is produced at costs far below the current price of crude, the head of the west's energy watchdog said, which means US projects can withstand the market slump squeezing other producers. "Some 98 per cent of crude oil and condensates from the United States have a breakeven price of below US$80 and 82% had a breakeven price of US$60 or lower," she told Reuters. Some OPEC members are calling for urgent output cuts to push global prices back up above US$100 a barrel as they rely heavily on oil exports to balance their budgets, but others seem relaxed. Saudi Arabia seems comfortable with markedly lower oil prices for an extended period, indicting a sharp shift in policy that may be aimed at slowing the expansion of rival producers including those in the US shale patch. Though the fall in the oil price would provide a welcome economic boost for economies which are heavily reliant on oil imports. The recent price drop is likely to present some challenges for those producers who base budget assumptions on oil prices above US$100 per barrel.