The global benchmark Brent oil price rose above the $55 per barrel mark Monday, while it was below $49 per barrel last Friday. Meanwhile, the American benchmark West Texas Intermediate spiked above $50 per barrel.
Both benchmarks fell around 60 percent since June 2014 and dipped below $46 per barrel on Jan. 13 — the lowest point since March 2009.
Oilfield services company Baker Hughes, based in Houston, said in its weekly report Friday that the number of oil drilling rigs in the U.S. suffered the largest single-week drop since 1987.
“U.S. oil rigs monitored by Baker Hughes fell by 94 units week-on-week on Friday,” Dominic Haywood, a crude oil analyst for London-based energy market consultancy Energy Aspects, told The Anadolu Agency.
In addition, there are 199 less oil rigs in the U.S. compared to a year ago, which is the lowest level since January 2012, according to the report.
“This is a leading indicator for U.S. tight oil production responding to lower oil prices,” said Richard Mallinson, a geopolitical analyst at Energy Aspects.
The steep decline in oil prices forced many producers who had high break-even prices and production costs out of the market, according to oil experts.
The break-even price is the minimum price level at which a producer has to sell its product in order to cover production costs. It is one of the key factors indicating whether a producer should invest in a field or not.
According to a Goldman Sachs research published on Dec. 15, most oil fields in the U.S. have break-even prices above the current oil prices.
While the U.S. oil fields in the states of Texas, New Mexico and Ohio have commercial break-even prices between $70-$80 per barrel, some fields in North Dakota and south Texas go as high as $80 to $110, while oil prices have been around $50 per barrel for the last three weeks.
An energy economist at the University of Houston in the U.S. warned in early January that falling oil prices would affect drilling and production in the U.S.
“At these low oil prices, the U.S. shale plays will see much less drilling in 2015,” Ed Hirs, an energy economist at the University of Houston, told The Anadolu Agency on Jan. 8. “The fast declines of the wells will reduce U.S. overall production very rapidly.”
Haywood stated that this is an indication of a potentially tighter global oil market to come and hence has helped prices recover.
“We have seen some short covering today, which has given prices a further boost,” Mallinson said.