The biggest state-run oil companies seem to be bracing for $40 a barrel — a 73 percent decline from the high set only four months back.
Meeting in Beijing, oil companies around the globe reached a consensus on the floor price as they see it, according to Fu Chengyu, chief executive of China National Offshore Oil Corporation. Oil now trades at $54 a barrel.
“The consensus at the time was that everybody realized the oil price would be even lower,” said Fu at the recent meeting, reported in the Financial Times.
“Nobody knew where it would be, but most of them said around $40.”
In addition to production cuts, major new projects are being shelved, Fu said.
Even at current prices, new production would be hard to justify. Fu estimated that oil in the mid-$50s would mean a 60 percent cutback in oil project budgets at state-run oil producers.
For deep-sea projects, which involve significant technological and logistical costs, prices need be at least $60 a barrel and up to $90 just to break even, Fu said.
OPEC members have lost $700 billion thanks to falling oil, estimates OPEC President Chakib Khelil in an interview with Algerian daily El Khabar.
The cartel recently agreed to cut output by 1.5 million barrels a day. Data due out in mid-December will show whether the typically fractious cartel sticks with that target, which might open the door to more cuts.
"All members ... are very concerned about the economic situation which has worsened in the United States and Europe who have entered into a recession, followed by Japan," Khelil said.
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