North American crude is expensive to pump, and the falling oil prices will only make production more difficult. In the past four weeks, oil prices across the globe have fallen about eight percent. The U.S. price per barrel closed at $85.77, the lowest it has been since December 2012.
According to a recent report by Goldman Sachs Group Inc., $90 per barrel and below will affect hydraulic fracturing projects in the U.S. Many producers break even around $80 to $85 per barrel.
The first drillers to be affected by the declining crude oil prices will be those in the outskirts of North Dakota’s Bakken Shale, according to Paul Sankey, an energy analyst with Wolfe Research LLC. Sankey said if prices drop another $4 to $5 per barrel companies will be forced to cut back on their capital budgets. Shares for Continental Resources Inc. and Whiting Petroleum Corp., both focused in the Bakken, fell by more the five percent on Thursday.
Although oil prices are falling, not all U.S. oil producers have to be worried. The Eagle Ford Shale and Permian Basin in Texas will still remain valuable to drillers. According to an analysis done by Robert W. Baird & Co., if prices fell to $53 per barrel certain areas in the Eagle Ford would still be profitable.
Read the full article by The Wall Street Journal here.