World Bank offers 2018 oil prices, shale breakeven points
A new report from the World Bank indicates oil prices will rise in 2018 and U.S. shale breakeven costs will stabilize in the $40/b range for most major shale plays.
Due to steadily growing demand, agreed production cuts among oil exporters (OPEC) and stabilizing U.S. shale oil production, oil prices will average $56/b in 2018, a rise of roughly $3/b over 2017. Brent crude was trading at the $60/b range in the last week of October.
Along with oil prices, other commodities are expected to rise in price next year.
Despite the fluctuation in oil prices, the World Bank pointed out that most shale producers in the U.S. have found a way to generate acceptable revenue returns at $40/b oil, some capable of doing so at $20/b oil. Several advancements in the drilling and completion process are responsible, including longer laterals, shorter drilling and completion times, greater proppant intensity and multi-well pad development strategies. Hedging practices have also helped producers. But, despite gains at the well site and through hedging, many producers are starting to experience service cost inflation and difficult staffing environments. Permian producers are having trouble finding skilled labor, the report said.
To view the full commodity outlook for 2018, click here.