Global oil prices will likely move in a tight range throughout the year with U.S. shale production keeping a low ceiling, a central bank report said Wednesday.
Low oil prices have been partly to blame for a prolonged slump in South Korea’s exports as petroleum and petrochemical products account for nearly one-fourth of the country’s overall outbound shipments.
South Korea’s exports have fallen every single month since the start of last year.
Global oil prices have somewhat recovered since hitting what many believe to be rock bottom at the start of the year. The average price of Dubai crude, South Korea’s benchmark, came to US$45.01 per barrel on Tuesday, up from an average $26 per barrel in January, according to the state-run Korea National Oil Corp.
The report from the Bank of Korea (BOK) said the price may already be at its ceiling, noting that the break-even point of U.S. shale producers has been significantly lowered to as low as $40 from up to $80 in the 2012-2014 period.
“Due to recent technical advancements in U.S. shale production, the break-even point has been greatly lowered on a decline in production costs,” the report said.
As of end-May, 316 shale wells were producing an average 4.29 million barrels of oil per day in the U.S., according to the report.
The number could increase to thousands once the global oil prices reach over the break-even point of U.S. shale producers, which in turn will put a downward pressure on overall oil prices, it noted.
Already, there are believed to be between 1,300 and 2,750 drilled uncompleted (DUC) shale wells in the U.S., many of which can be completed to begin production in less than a month, the report said.
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