The growth of US oil production may stop in the second half of 2015 and could decline in 2016 if global oil prices remain low, making oil drilling uneconomical, according to a new report.
American oil production growth will halt by the middle of this year if oil prices remain below $60 a barrel, said the IHS report based on a study of 39,000 oil wells in the US.
By January 2016, US oil production growth will have been flat for several months, the report said.
“If oil prices remain weak and confidence in future prices remains shaken, US production in 2016 could possibly flatten or even decline,” said Raoul LeBlanc, IHS Energy Senior Director of Financial Markets and co-author of the report.
The price of oil has declined 60 percent since June of last year due to a global oversupply. US oil is currently hovering around $50 a barrel, down from about $110 in June.
The steep price reduction has forced a slowdown in oil drilling and ended a five-year boom that pushed US production to record highs.
Chevron Corporation, ConocoPhillips, and other major energy corporations said that they will cut capital budgets in 2015 considering the lower oil prices.
According to IHS, more than half of US oil wells drilled in 2014 were uneconomic below $60 a barrel, and 30 percent of new wells were unprofitable below $81. Just 25 percent of the wells drilled last year were profitable at a price of $40 or less.
Global oil prices have bounced back slightly from below $45 last month, and many factors could boost oil prices quickly, analysts say. “So much can happen over the course of a year,” LeBlanc said.