Oil price reaches unprofitable level for practically everyone

Analysis: The price of crude oil is now headed towards USD 30 per barrel. At this level, pretty much every oil producer is losing money. Structural budget cuts such as divesting shares and canceling projects are definitely looming in the shadows more than ever before.

Photo: Øyvind Hagen/Statoil

It is doubtful that anyone is envious of the budget planners in the international oil industry, as 2016 looks like it will be one of the most unpredictable years ever. Tuesday afternoon, the price of crude oil from the North Sea broke the symbolically important limit of USD 40. Crude oil from the North Sea is the controlling price for the majority of the global oil trade. Which is why this negative price breakthrough carries more significance than the fact that US crude oil reached a low of USD 36.65 per barrel during trade on Tuesday.

The price of USD 39.85 for a barrel of crude oil from the North Sea set for delivery in February of 2016 is the lowest since February 2009. With these prices, it is now just a small fraction of the global oil production that continues to be profitable. The consequences are definitely becoming appreciable. In a newly released report, the World Bank confirms that the economic slowdown in many developing countries is still outlining more and more a long-lasting period with weak growth rates.

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